How to Increase Your Accounting Fees: A Complete Guide to Raising Prices Without Losing Your Best Clients

Why we procrastinate on fee increases

The reasons for getting stuck and not implementing the fee increase fall into one of three categories. Which one is holding you back?

1. Lack of self-esteem and confidence

The main barrier to raising fees is fear: not wanting to handle difficult conversations, worrying about clients leaving, or becoming more expensive than your rivals. This fear comes from the amygdala – a small area in your brain that plays a huge part in memory, decision-making and emotional responses.

You may have heard of the amygdala in relation to the fight-or-flight response, but it does far more than that. It floods your conscious brain with fears, sabotaging your attempts to act. That’s why we always tell our Accountants’ Growth Club members that the biggest battle with fee increases is conquering the fears in your head.

What this means is going beyond the irrational fears and starting to think rationally. The first thing to do? Write down a list of the fears that are in your head right now. How many of these are real fears?

The fees you quote are directly limited by your own self-esteem. For example, by raising your fee level, you’ll become too expensive for some clients and prospects (of course, not every client will want to pay your new fee level), so this means you need to be confident that you’re charging what you’re worth so that you can take the rejections.  This confidence is what will keep you pushing ahead to find bigger and better clients that you actually want.

Put simply, if your self-esteem is low and you don’t value your firm’s abilities, then why should your clients?

Here’s the reality: most firms find that they only lose a handful of clients when implementing an increase, often the demanding, price-sensitive ones they wanted to lose anyway. So the gains in profit really do offset the losses. Think about it. If you put your fees up by 5% and lose a small percentage of clients, you’d still make more on the bottom line. 

Many of our club members have been delighted to find that the only clients they lost were the ones they wanted to lose, and they wish they had increased their fees sooner! Their fear was often of losing clients and money, but the reality rarely came close.

2. Prioritising time

Yes, some people really do say they don’t have the time to increase their prices. Yet these same people will spend hours each week networking or on social media for less benefit. For example, one of our Accountants’ Growth Club members “didn’t have the time,” but when we ran through the numbers, she realised that raising her fee levels was equivalent to winning 20 new clients. Guess what? She quickly prioritised the fee increase above everything else on her to-do list!

If you’re short on time, ask yourself the right questions. What do you really need to do before increasing fees? Perhaps a quick analysis of who pays what and the related profits. Or just a list of the ones you know you need to start with. Plan who you’ll speak to and when. You could start next week with the first few conversations or emails. You don’t need to do them all at once, just get started and then do a few at a time.

3. Poor service 

Improving service levels is important, but are you going round in circles? Can’t improve service because you’re not profitable, don’t want to increase fees because of poor service? The short answer could be to start increasing fees for new clients, happy clients and low-profit clients first.

Conquering the mind game (10 ways to build your confidence)

Many accounting firm owners worry about how to increase accounting fees, but we always say that you need to feel the fear and do it anyway. Here’s how to increase your self-esteem and confidence:

1. Know your why – What’s driving you to put up your fees? Having more time? Finally being paid what you’re worth? When you know why you’re doing something, it becomes much easier to stand firm because that’s the only way you’ll achieve it.
2. Lose the discount mindset – You’re not a new accounting firm anymore, taking on anything and everything just to pay the bills. You need to know the value that you bring to clients. The ones worth keeping will pay for it.
3. Lose the “I need to win every client” mindset – The beginner’s need to win might still be the reason you’re not getting paid what you should. You need to change this mindset to “I need to win bigger and better clients.”
4. Be prepared and accept that you’ll lose some clients – Stop worrying about rejection and just accept that you’ll lose some clients when you increase your fees. Typically, these are the clients you want to lose anyway. By preparing yourself for some losses and accepting them, you’ll be more able to stand your ground with your prices.
5. Know what the market is charging – Have the confidence to listen to what other people are charging so you can understand how to increase accounting fees and still be acceptable to the market. Don’t get too caught up in what your competitors are doing, however. Just concentrate on your prices and be ready to justify why they’re different.
6. Emphasise your value – If your clients are talking about your competitor’s prices being lower, you need to tell them that you’re “not competing on cost, you’re competing on service.” Demonstrate the value that you can bring them.
7. Role play potential “what happens if?” scenarios – It may help you to stand firm if you’re prepared for potential scenarios. Practice these with someone, and you’ll be much calmer if there’s pushback on pricing. When most people list out their worst-case scenarios, there’s a realisation that they’re not likely to occur. And even if they do occur, you can prepare a response in advance.
8. Be aware of different cultures – Some cultures expect to negotiate. For these clients, be upfront and offer them the option of you telling them the price they’ll pay or a higher price which you’ll discount.
9. Build your confidence gradually – Do the easy fee increase conversations first to build your confidence up, then approach the ones you know you need to change, but you wouldn’t be sad if you lost them. By the time you work your way up to your big clients, you’ll be much more prepared and able to stand firm.
10. Negotiate only as a last resort – If you have a great client that you love to work with and the type of work fits your niche, but they just don’t have the budget, negotiate a rate that works for both of you. This needs to be a last resort, but you could bundle in things which are more valuable to you in exchange for less of an increase (e.g. paying monthly via direct debit, using software that reduces your workload), agree to less experienced staff taking on their workload, or negotiate a longer turnaround time.

How to increase accounting fees: the 4-step process

Once your fears are conquered, it’s time to do a Client Portfolio Analysis and identify which clients need their fees increased. Then, put together a plan to re-quote and speak to all the affected clients.

Step 1: Decide on what to charge

When thinking about how to increase accounting fees, you first need to know how much you’re going to increase their rates by. As a rule of thumb accounting firm owners should review their fee structure every 12 months.

To help you decide on what to charge for your services, a valuable exercise is to benchmark your fees against local competitors and similar-sized practices. While this shouldn’t dictate how much you charge, it can be useful to make sure that you’re not undercharging for your service offering and that you remain competitive.

At this point, your brain is naturally primed to suggest prices which are similar to your existing prices or a peer’s prices (that’s the “anchoring effect”, having a number that is anchored in your mind), but try to forget about your current or your peer’s pricing for a moment. It’s time to look at your personal goals and your business goals, as these goals should drive your ideal pricing.

For example, if you want to be achieving a 40% net profit margin, what would the pricing of your packages need to be at current forecasts? You may need to play around with some scenarios in a spreadsheet to answer this question.

Step 2: Identify clients needing the increase 

Once you’ve decided on your new fee levels, you now need to conduct a Client Portfolio Analysis (looking at what each client spent over the last five years). Identify which fees you need to increase (i.e. those who are unprofitable or barely profitable or paying less than current or future rates). Does your whole client base need to increase or is it just a handful of clients?

If you have a quoting tool (you’ll have to do it manually if not), use this for each client to work out what their minimum necessary new fee should be. You can then start making an action plan to implement them.

Step 3: Start using the new rate for new clients

You want to get every new client that you win onto your new higher-fee pricing model. Negotiating a fee increase is never easy later on, so from the get-go, you need to use your quoting tool to work out the rate for the client.

If you use your quoting tool in the initial meeting with the client, they can see how it’s calculated, and they’ll be much more likely to accept the rate. If they try to negotiate, stay strong and highlight the benefits and value that they’ll get, which are reflective of the prices. You don’t want to be making deals from the start, otherwise they’ll come to expect it.

In your fee conversations with new clients, it’s particularly important not to train them into thinking that there’s a deal to be done. This needs to be avoided at all costs! Accounting firm owners often train their clients to expect deals by giving first-year discounts when they ask what can be done to lower fees, or by underquoting the fees stated on their website.

At the end of the day, if you train a client from the outset that there’s a deal to be done, this is the mindset the client is likely to have throughout your relationship. Whilst there’s no guarantee they’ll become a difficult client, it’s always going to be tough to get this client onto a profitable fee basis. After all, it’s hard to negotiate fees up from a low starting point.

Step 4: Prepare and have the fee increase conversations

The last step of the fee increase process is how to announce a rates increase to clients. This is one of the hardest conversations that any accountant will need to have, but with the right preparation and confidence, those phone calls or face-to-face meetings will most likely be a success.

Here are the key tips when it comes to having the conversations:

1. Create an action plan for each client
2. Think about potential objections that each client may have and practice your response
3. Focus the conversation on the benefits and value you can give your client, not the money
4. Pick clients who you don’t mind losing as your first few conversations
5. After the conversation, follow up with an email or letter outlining the changes and benefits
6. Refine and improve this process once you’ve implemented a fee increase

When you tell your clients about the fee increase, they’re going to have exactly the same questions in their heads as you did. This means you need to get your story together about why fees need to go up. But not just ‘why’ – if possible, what extra value will you be able to give to your clients as a result of this fee increase? Or why you can’t carry on giving this level of service at the fee they’re paying?

Maximising the success of these conversations

When is the best time to raise fees?

It’s now time to decide when you’re going to contact each of your affected clients. If you have to re-quote for a large proportion of your clients, it’s best to phase these conversations across 3, 6 or 12 months. By phasing your fee increase conversations, it reduces the probability that you could lose too many of your clients in one go.

The best time to re-quote for clients is 1-3 months before their financial year end. The reasons for this are multiple:

• You have the opportunity to completely review their business and financial needs for their new financial year
• This is the best time to pick up some ad hoc tax planning or advisory work for their new financial year
• Your current contract is probably due for renewal around this time

You want to re-quote 1-3 months before the client’s financial year-end, aligning with the business review and renewal period.

How should I notify clients about the increase?

Clients can avoid emails about fee increases, so the best way to implement a fee rise is to phone or have a face-to-face meeting with each of your clients to let them know about the fee increase. You should then follow up with an email or letter.

You want to make your client feel valued, so open your price increase letter with something personal. This could be a previous glowing testimonial that they gave you or great results that you previously achieved for them. For example, “Thanks to the glowing testimonial that you gave me, I know that you’re incredibly happy with the value that I bring to your business.“

By leading with something personal, you’re immediately reminding them that you have a great working relationship and you bring them value. Just remember to keep this brief.

Then you need to give a clear explanation of why you’re increasing your fees. Remember to focus on the “why” and value. Provide a clear, brief explanation of the increase, linking it directly to the benefit for the client (continuing great service, covering rising costs, investing in better systems).

When Sue Penney of Penney’s Accountancy was struggling with putting her fees up she turned to her Growth Expert at the Accountants’ Growth Club. Her expert helped her to ‘get out of her own head’ and also helped her write a letter to inform her clients about the fee increase. Here’s how Sue went about informing clients about their fee increase.