How to price complex tax planning work

So today what Paul asked me to do was to talk about applying value pricing to tax planning work. So that's what we'll do and I thought I would. I'm going to share really, five, five key learning points, five, five things. But I'm going to illustrate with a story, a real, a real story from my past, illustrate some of the mistakes made and before I dive into that, perhaps just a bit of background. So a couple of you know me from the AVN days, but for those of you that don't.

I am an accountant, Chartered accountant. I've been in the profession now for over 30 years. 1988, I left university in Sheffield, went to work for the largest independent firm in Sheffield, a firm called Barber Harrison Platt. They're still the largest independent firm, I believe, in Sheffield. I spent three years qualifying as a chartered accountant. I then once I qualified, they asked, they knew I didn't like audit work so they invited me to join their tax department and then I became their first proper corporation tax manager. Corporation tax was the thing I enjoyed more than anything. So I stayed there for a few years and then in 1996 decided that what I really want to do was be my own boss and start my own firm. So I started in May 1996. I had a spare bedroom in the house, I bought a computer, I bought a desk. I had no clients and decided to start off my sole practitioner business. It was an exciting time, full of hope, enthusiasm, optimism for the future. Little did I know how difficult the next two and a half years would be. I made so many crazy mistakes in those first two and a half years. Life was tough. It might have looked like I was successful because I was growing really fast. I went from no clients to over 200 in the first two years. I moved into my first offices after two months, outgrew it after 13 months and moved into bigger premises. It looked like I was growing and successful. The reality was by the end of 1998, two and a half years in, I was working crazy, crazy hours and struggling to make ends meet. And that's when a number of things changed in my life. So at the end of 1998, I first met Steve Pipe. He was just starting AVN at the time. I went on his three day accountants masterclass in October 1998 and he completely changed the way I thought about running a professional service business. And thanks to Steve, that put me on a journey where I then went on the four day Accountants Boot Camp in June 1999 and met Paul Dunn and he opened my eyes to another way of running a firm. And then Paul introduced me to ron Baker in 1999. And it was Ron Baker who first explained this idea of value pricing to me. I'd grown up in the accounting profession believing we had to keep timesheets, believing we had to bill based on the hour. And despite the fact I was meticulously putting 70% chargeable hours every single week, I wasn't making ends meet. So something was wrong. Something was wrong. And when Ron explained value pricing to me in 99, late 99, this light bulb went on in my mind and suddenly everything made sense.

I started on my value pricing journey in 99. Had some amazing successes early on, particularly around tax. Tax planning and tax compliance. Had some significant results. So much so that Steve pike then asked me to share my story at his events. I spoke at the first AVN conference in February 2000, and after that, I then spoke at every single AVN event Steve ever did. I then, a few years later, decided to sell my accounting firm. I.

My client managers bought it. Steve and Jonathan bought the firm off me and I went into business with Steve and we ran AVN for about a decade together. And we're still great friends. Steve then retired, and I decided what I want to do was then run what I'm doing now, which is I got really into the whole pricing thing because pricing had a huge impact on my accounting firm. When I was working with Steve Thravian, I found the stuff I was teaching on pricing was having a huge impact on the firms that I worked with. And so in 2014, I founded the Value Pricing Academy. I've written a number of books on value pricing. My next one's coming out in January next year, I think. And I now teach accountants all around the world every single month through the Value Price Academy. How to Price Better. How to Build a More Profitable Business with a real Focus on price. So that's my background, that's what I do. So let's dive into today, and we're going to look at.

How to price tax planning work. Big topic. A lot of stuff we could cover, but I thought the best way to illustrate it was a real story. So if we go back to 1999, that was when I started exploring value pricing. I believe it was around about September, October, it was the autumn of 1999. I'd started value pricing my firm. Before that, I was purely billing based on the hour because that's what I thought you had to do. I didn't realize there was any other way of pricing. Now also at that time in 1999, and some of you, if you're as old as me, you might remember there was a big thing in the tax world in 98, 99 was this whole issue of status, where particularly in the construction industry, where the, and more driven by the contributions agency than what is now HMRC, about whether or not subcontracts in the building industry should really be self employed or when they should be on the books. So status was a big thing and I had a few construction industry clients and subcontractor clients in my accounting firm. And I love tax planning. And so this was something I really got into in quite a big way, trying to understand status, which you probably know is there's no legislation around it, it's not a statutory definition, it's based on case law over the years. So I got fascinated by this.

And then I had a situation where in the, I think it was the middle of 1999, I went to see a potential new client. They were a father and son business, they ran a painter and decorating business, fairly successful business just outside Sheffield. And I sat down with them and as I always do when I meet prospective clients, I asked if I could see a copy of their last few years financial statements really because partly for two reasons, I always ask for a copy of the financial statements because.

I told them the reason was because I wanted to look through the balance sheet, look through the profit and OSCAN to see if I could spot some tax planning opportunities. And that was where I usually with my meetings with potential clients, focus my conversation around tax planning. But actually there was another reason for asking for the financial statements, which in hindsight looking back was a really stupid thing to do. But what I did in those early years is I would ask for a copy of the financial statements, the annual accounts, and of course what I would do is as I was looking for tax planning tips, what I would also do is I would flick to the back page. The back page is the detailed profit and loss account and I'd be looking for one number in particular. I would be scanning down, looking for the line that says audit and accountancy fees to see what they were paying the previous accountant. And so for two and a half years my pricing strategy was to look for that number and go in with a price that was competitive. And that was how I grew my practice so fast. I thought I was clever, I, I thought I was building a really successful practice. What I realized was that I was being a stupid idiot, underpricing, being competitive, when I now realized that Most accountants are way too cheap. So the worst people, the worst people that we should compare our prices to, the worst people we should copy or try to be competitive with is our competitors because they're too cheap. And so that's why I was struggling so much in 98 and early 1999. Anyway, as I was looking through the financial statements, the accounts of this father and son book, father and son painter and decorating business, I noticed something really interesting. I noticed that in the, in the last year and the year before that, in the previous two years, suddenly appearing on the profit and loss account was this line that said employers national insurance contributions, which was.03 four years earlier but suddenly jumped to £30,000 in each of the last two years. So I said to them, I said, tell me why have you suddenly started paying £30,000 in Employers national insurance contributions? And they explained to me that their existing accountant, who wasn't a qualified accountant, said.

That because of the pressure with the contributions agency, the general advice was you have to put your subcontractors on the books, put them through payroll and of course start paying payroll taxes, employers national insurance. And I said that was, that's not right. They are, we can definitely argue they are self, they are self employed. And so I hired, the client, hired me, they took me on and the first thing that I did for them was I developed through my tax planning, I developed this contract for services which was full of clauses that were all backed up by case law that swung the balance towards them, demonstrating that they were self employed, not employed. So I created these contracts for services. It was something I'd already got because I developed it myself. It was a simple contract, it was a Word document. And what I did was I got the names and addresses of the subcontractors, put them onto an Excel spreadsheet, and I got my secretary to do a little simple mail merge, to mail merge them all in. We printed out these contracts for services. I got the client to sign it and then I told them how to take them back off payroll.

And so what did I charge for that? What did I charge for that? I decided that I would charge every single penny that I had put onto my timesheet. But because it was a really simple job, it didn't take me long to do at all. The bill for doing that was about £250. That's what I invoiced, £250 for putting in place these contracts for services.

Now a couple of things happened shortly after that. Number one, the client got a call from the Contributions agency saying, why have you taken your subcontractors off the payroll? And they said, because my accountant told me to. And so they decided to come and visit the, visit the client. So I was a little bit worried and anxious at this point in time, I was a little bit anxious. But anyway, they came to visit the client and at the end of, the end of the meeting they contacted me and they said, they said, yep, these contracts of services demonstrate they are self employed. They we're happy, they said. So I breathed a huge sigh of relief. However, at the same time I had just discovered this thing called value pricing. And as I started to understand and the concept, the penny kind of dropped of this value pricing concept and suddenly I had my head in my hands thinking what an idiot, what a crazy idiot. Because what I'd done for this client is I'd saved them £30,000 in employers national insurance every single year for the current year and the years to come, I'd save them £30,000. So over the next, let's say five years, that's 150 grand's worth of value over the next five years and for creating 150 grands worth of value for the client and I bill them £250, which is absolutely crazy. So first learning point, first learning point, which, and I've got five key learning points. The first learning point is we absolutely should not be pricing tax planning work based on how long the work takes because that's completely irrelevant. No client is ever interested in how many hours we spend doing something they're not interested in, that the only thing the client's interested in is the end result, the result that we can get for them. And the great thing about tax planning work is that we can get big results for clients. And so this should be one of the most profitable things that we do. But I charge £250. So I was extremely upset at that point and realized that I'd left a huge amount of money on the table. However, all was not lost because I then had this idea, this brainwave. I thought, okay, they've had the visit from the contributions agency. The agency has looked at the contracts for services I put in place and ruled that yes, they are correctly classified as self employed. So I then start to think, what about the last two years? What about the 60 grand that they've paid in employers nat insurance that they only paid because their previous accountant incorrectly advised them to go on the books. I thought to myself, is there a way of getting 60 grand back for this client? Now I Had no idea whatsoever whether that was possible. I had no idea what to do because, as you know, we're talking about the contributions agency and not HMRC as it is now. I forget what it was called back then. Inland Revenue. Inland Revenue. And so there were different departments. And being an accountant, even though I did tax planning, it was really Inland Revenue I dealt with. I didn't have much experience with the contributions agency, so I decided to make a phone call because at that time, in 98, 99, a lot of the things I'd learned about status and the construction industry was from somebody who is certainly at the Time was the UK's leading expert on status. His name was David Smith. He worked for an organization called Accountex, which actually also happened to be. They were Milton Keynes based. Accountex were a telemarketing company, but they also happened to have David Smith on board. And David.

They ran training seminars around tax planning, particularly the construction industry. So I knew David very well. I'd been on all of his courses because I was fascinated in this area. So I ring up David and explain to David the situation.

What's the chances here of reclaiming employers National Insurance? And he said to me, he said, that's really interesting. I have never, ever, ever come across a case where anybody has reclaimed employers National Insurance because of incorrect. Incorrectly putting people on payroll. I don't know if it can be done, he said. He also went on to say, it's also potentially quite difficult because if you end up not getting the result you want, then the appeal process is different. If it's the Inland Revenue, you appeal to the General and the Special Commissioners. But he explained that with the contributions agency, if you want to appeal, I think he said, you have to go through the Secretary of State or something. This all scared the life out of me. And I'm thinking at this point there's no way that I'm gonna have the. I haven't got. I'm a sole practitioner, there's no way I can get 60 grand back for the client. If David Smith, the number one expert in the uk, is saying this has never been done before, as far as he's aware, then I'm thinking perhaps this is something. I just have to let it go. But I asked him a question. I said, david, would you be able to help me do this? And he said, yes. I said, what would it cost? And he quoted me an hourly rate of 500 pounds an hour, which back in 1999 was a high hourly rate. I nearly fell off my chair and I just Thought to myself, that's crazy. There's no way that I'm going to pay him £500 an hour for something where he doesn't know whether he'll be successful or not. So I politely declined his offer to.

Do the work for me at £500 an hour because.

I would be the one taking the risk that if we didn't get a result because I was subcontracting, I couldn't afford to pay that. So I said no, but I don't like letting clients down. And so I thought about this and thought, I'm going to give this a go. I'm going to give it a go. I'm going to see what I can do. So then the problem, the issue then becomes, okay, so how much do you price for this sort of project? How much do you price? I have no idea what works involved. I have no idea how many hours I will spend doing the work. I have no idea what the outcome might be. I have no idea whether I'll be successful or not. There is so much uncertainty over outcome, uncertainty over scope of work hours. I have no idea where to even begin. What I could have done is revert back to the timesheet and bill based on the number of hours. But I was all fired up by this value pricing. I'd had some successes with some other things I was doing at that point in time. And because I'd made a huge mistake with the original contracts for services and bill £250, I was determined to try and at least partly rectify that. So I thought about the. I thought about the proposal, what I would charge for it. I thought very carefully about the language that I would use, because one of the things that I've learned with value pricing is a lot of people think that value pricing is simply a case of calculating a number, coming up with a price. And actually, that's a really tiny part of value pricing. Value pricing is more about.

How do we create value and how do we communicate value, how to get the client to understand the value of what we do so that our price seems like a great price, even though it might be really expensive. So I had a think about the process of what I would do. And what I'm going to share with you is the exact proposal that I sent to this client. Now, I made lots of mistakes, and I will point out mistakes I made. I made many mistakes with this particular project. I was the early days of my journey of value pricing.

However, there were some interesting things I learned as part of it. So if I just flick across for a minute and my other computer's fallen asleep. Let me just wake it back up.

Okay, so this is the, pretty much the exact letter that I sent out in 1999 to this particular client. And just in case you're thinking, how on earth has Mark got a copy of a letter sent out in 1999, it's simply because in 2000, Steve asked me to then start teaching avian accountants the results I was getting. So as I had these successes, I kept all of the original agreements and so on. And they've been on my hard ever since when I've used them for teaching people some of the things that I discovered. So there's lots of mistakes in this, lots of things I didn't do right because I've learned since. But nevertheless, there's still some interesting things that will come out of this. And the first mistake that I made, first mistake, and this is a big mistake, is I'm an introvert. So I, because I'm an introvert, when it came to, it comes to pricing, I would tend to hide behind letters and emails. We had letters back then more than emails, but I would hide behind the written word. And so I sent this through the post or by email to the client. What we should do, have pricing conversations face to face and we might come back to that later. But nevertheless, this was a written form of price communication and it had some interesting results. So what did I say to the client? What was the wording I used? Well, I sent this letter to the client and I said, first of all, big headline, because I was a big student of marketing. And marketing is really important when it comes to pricing because pricing is one of the four P's of marketing. Pricing is marketing. Also, pricing is part of the sales process. Pricing is sales and marketing. It's as simple as that. And so there's a lot of things that we can learn from the world of selling and marketing when it comes to pricing. And one of the things I learned was grab their attention early. Grab the attention. So there was a headline, it said, you could be due a big refund of tax.

And then the opening sentence after that, I want to build on that, grabbing their attention. It said, I think there may be an opportunity to secure a refund of a significant amount of employers national insurance.

Which will of course be pure profit to you. So again, just getting them excited as they read this letter. It then went on to say, when you were told incorrectly to put your subcontractors on the books, you and they have paid Nash Insurance that was not due. As I understand it, the amount involved is in the region of £60,000. I would like to help you get this money back, which, judging from past experience, will not be easy. So a couple of points about that particular sentence. Number one.

I put in bold the sentence that said it's in the region of 60,000. Why? Because a lot of communication, a lot of communication we use is part of marketing, as I say, and so we should be using certain things. We want to use techniques like embolden, underline to highlight things that we really want to. We want to build up the value in the client's mind. So that's why I did that. Secondly, although I had no idea what the success might be and exactly how much money the client may or may not get back, I put a number to it. We want to use numbers because they're more real. And I'll come back to that point later on, but if I'd have just said, I can get you some tax back, it's hard to put a value on that. It's hard for the client to get too excited about that. But when I say it could be in the region of £60,000, now the client's starting to think about, wow, what could I do with £60,000? The other important thing about that particular sentence, the next sentence is I then said, I would like to help you get this money back, which, judging from past experience, will not be easy. Now, in this particular case, that was completely true, because I had no idea whether or not it would be possible to get this money back. But one of the points I want to make to you is one of the things that we do, a mistake that we do is we undervalue what we do, because sometimes what we do with tax planning, it's fairly easy. To us, it's fairly easy. Let me give you an example. For those of you that are really old like me, you may remember the days before self assessment and before self assessment. So.

In the early 1990s, what would happen before self assessment was that.

Clients could get away for years without doing their annual accounts and without doing their tax returns. And what would happen is the tax man, the Inland Revenue, would, every now and then they would send out these great big sheets of paper which were estimated assessments. And so when I spent a couple of years working in a tax department doing income tax, my main job, as well as tax return prep, was dealing with estimated assessments. And the process was fairly straightforward. What would happen is an assessment would come through, it would be estimated and you'd get back in those days, you'd get these two part appeal forms with that carbon paper in between and we'd hand write the appeal forms and send a copy off the Revenue and keep a copy for ourselves. And most of the time the Inland Revenue accepted the appeal until eventually they would then start to get a bit heavy about. Let's get these last six years of accounts done now and the tax returns caught up. That was how it worked before self assessment crazy days. But anyway, it was a simple process. It was really simple. A lot of what I did was just filling in these appeal forms. And so what would sometimes happen is a client would ring up on a Friday. Sorry, on a Monday morning. They'd ring up on a Monday morning, call would come through to me and they said they'd say something like, on Friday I got this estimated assessment for 60 grand in tax. I've been worrying all weekend about this. I've been so stressed out.

And my answer would be, oh, don't worry, it's really simple, we can fix that. Leave it with me, we'll fix it. It's simple. And the trouble is, as soon as we say something simple.

We now have really devalued what we do and, and therefore we can't charge a proper price. We must change our language. It's only simple because of all of the years of experience that we've had, the experience, the training, the knowledge we've built up. So even if something in tax planning seems simple, it's usually not the client, it's not. They've been panicking about this. And so to get an estimated 60 grand assessment down to zero for. From the client's point of view, wow, that's huge value that's giving them. That's taken away all this worry, this stress they're having and so we shouldn't be charging for the five minutes it takes to fill in an appeal form. Okay, we don't have those now. That was back in the early 1990s. But that's. I just wanted to just illustrate some of the things that we have to change. We have to change our language. It's not easy. Tax. Tax is not easy. Okay, let me move on to the next thing that I said. And the next thing I said was, obviously at this stage it's impossible to say how much work will be required to achieve this result. We also can't guarantee exactly how much tax will be able to save for you, if any, although we could bill you based on the number of hours we spend on the project. I'm sure that you don't want any surprise bills. Now, interestingly, a few years later, in 2005. And by the way, by the way, when I say surprise bills, that's exactly what we would do to clients. We would say, I have no idea how long it's going to take. Our charge out rate is this, but we have no idea. So what we'll do is we'll do the work, we'll keep an itemized record of all the time we spend and when we finish, we'll send you an itemized bill listing the hours that we've spent, the telephone calls we've made and we'll add it all up. Trust us, it will be accurate. And we would then send the bill and that bill is always a surprise to the client. And in 2005, November 2005, sage, the big software company, they did a research report and they surveyed thousands of business owners in the uk and they asked one really interesting question in there. What's the thing that you hate the most about your accountant? And this was thousands of business owners. The number one thing they said, surprise bills. Clients hate surprise bills. They want to know up front what the price is going to be. And yet for years with hourly billing, we've inflicted surprises. Some people call it ambush billing. We don't tell them the price because we don't know. We hide behind this excuse. We don't know how long it's going to take. We have no idea. And so we just give them an hourly rate and clients hate it. So we have to stop doing that. We have to change and stop doing that. So if I just go back to here.

So what I did in this particular letter, I told him, look, I have no idea how long it's going to take. And I had no idea how long it's going to take and I have no idea whether it will be successful or not. But I know the clients, I know clients don't like surprise bills. And I knew that as they were reading this, they were thinking, yeah, that makes sense. We don't like those surprise bills. We want to know what the price is going to be. They do. So I then went on to say.

So in the spirit of our no surprises fixed fee policy, I thought I'd drop you a line now to tell you exactly what your investment in our services will be. And so what I did is I sent them in the letter. It said, our fee for dealing with this work will be £12,000 plus VAT.

With an asterisk at the end of It. So I gave him a fixed price of 12,000. Where did that 12,000 come from? Well, it certainly wasn't based on number of hours because I had no idea how much work was going to be involved. This is based on value. This particular case, if I could help the client to get £60,000 back, then that's £60,000 of value, roughly speaking. I mean, there are other things that impact on value. But the thing about tax planning, because we can usually quantify how much tax is at stake, we can quantify how much value there is, give or take a bit. So I use that 60,000 as a, as an approximation for the value to the client. And so as long as my price is below that, then the client makes a profit on the deal. And so I went with 12,000, which, if you do the math, is 20%. I think it's 20%.

Why 20%? I was still learning value pricing, I was still figuring things out. And so 20% felt fair to me. I keep a fifth and they keep four fifths of profit.

Now, in hindsight, in hindsight, one of the mistakes I made in this particular case was I was way too cheap. Way too cheap, way too cheap. I mean, I was happy, I'd been happy with that. I was a sole practitioner, I'd only been in practice for three years. This would have been, if it was successful, this would have been my biggest fee that I'd have had. I think my previous, that was about five grand was my biggest fee. So this was a big deal for me at the time. But I also know that in hindsight, I under priced this significantly and I could, I could have potentially got 30,000, 50%. People often ask me, when it comes to tax paying, what percentage? If I'm coming up with a price based on value and that's a percentage, how big should that percentage be? And it really depends on a number of factors as to how big the fee should be, how big the fee the percentage should be. And.

I usually recommend that 25% is a good starting point. I went with 20, 25% would have been better, but I could have got 50% because there are a number of factors in this particular case which.

Which meant I could have got a higher fee. So when we're looking at how much we can charge for tax planning work, what sort of percentage should that be? We need to look at things like what is the amount of money involved? Is it a significant amount of money? What's the level of risk in this? What's the level of risk in terms of the outcome. In this case, it was extremely high risk. I had no idea whether this would be successful or not.

Another thing to consider that's very important when you are deciding how much to charge for tax planning work is.

How unique is, how unique are you?

Could anybody do this sort of work? And in this particular case, I didn't think about it at the time, and I wish I did, but there probably weren't many people in the UK who could have done this. David Smith, the number one expert at accountex, had never done it before. He'd never tried to get money reclaim employers, National Insurance from the contributions agency. So I was in a position where probably most people wouldn't have attempted it, but I was going to give it a go. So there's all these factors we need to think about and there's one other factor that's really important, if you are willing to do it. So let me go back to here. So I decided to come up with 20%. In hindsight, too cheap. But I had that asterisk and that's because I did something else that is very powerful with tax planning work. I went on to describe, and I'm not listed here, but I listed what I would then do, what were I going to do, what work would I do as part of the project? And I explained what I was going to do. But at the bottom of the page, the bottom of page one, there was this wording that I got. It said, we will reduce this fee to 50% of the refund you actually receive if it's less than 24,000. In other words, we guarantee that you will get a much bigger refund than you pay us in fees.

And.

One of the things that I found is that guarantees, when it comes to value pricing and pricing, getting good prices, guarantees are one of the most powerful things that we can do.

One of the things that any customer worries about when someone's making a buying decision. When we decide to buy something as a customer, we always take on board some risk. There is always a risk that that thing that we buy doesn't deliver what we hope for, what we expect. And the greater that level of risk from the customer's point of view, it makes it harder for them to buy.

So if we think about this from a minute, when I decided I might subcontract this to David Smith, he said to me, he'll give it a go. Never done it before, didn't know whether it be successful or not, and he would bill me £500 per hour for doing the work. Now I was the customer in that situation. For me, the risk was huge. I had no idea how many hours he'd bill, he'd rack up. It could be 10 hours, five grand, it could be a hundred hours, it could be 50 grand. I couldn't afford that. And I had no idea whether or not he would be successful or not. And if he wasn't successful, I couldn't bill the client, so I would stand the full cost of it. So for me, as a customer looking to hire David Smith, there was a huge amount of risk, and so I declined. And this is another reason why with tax planning work, we shouldn't bill based on the hour, because the client's taking all the risk. And so they're going to be. In some cases, they'll say no, it's just too expensive. They can't afford that risk. And so there's always a risk for the customer. There's a risk that what they're paying for doesn't give them what they hope to get. So the more that we can take that risk away from the customer and put it on our shoulders, the more that we can take risk away, the easier it becomes for the client to say yes. And the more we take risk away, the less important price is.

In other words, when we have a guarantee in place, we can charge much, much higher prices.

In this particular case.

This 12 grand would have been, for this particular client, probably the biggest professional fee they'd ever paid. And so, and I know that because the father rang me up after him and said, 12. That's a lot of money. 12 grand. And he may well have said no if it wasn't for the fact I had said to him that we guarantee, we promise that I will get you a bigger result back than you pay. If I can't get you more than double that, if I can't get you between 24 and 60 grand back, then I'll reduce my fee for 50%. And if I can't get you anything back, I won't bill you a single penny. And I remember he said to me, he said, mark, he rang up and said, this is really expensive. This is 12 grand. I've never paid 12 grand to an accountant before. That's a lot.

But I can't lose, can I? I said, no, you can't lose. So he said yes there and then, because I was the one taking the risk.

So guarantees are extremely powerful. We can use guarantees in all sorts of ways. We can. We can guarantee delight, we can guarantee speed.

We can guarantee outcomes. Now, in this particular case, I was guaranteeing the outcome. Guaranteeing outcomes is one we have to be fairly careful of, though. When I teach people, for example, how to value price business advisory work, you should never guarantee outcomes. If you're working with a client doing business advice and you've played with some numbers and you think if you work with them every month for the next year, you might be able to help them double their profits and add £50,000 to their bottom profits. Never have a guarantee around that, because you can't. You have no control over the outcome whatsoever. You have no control that the client will actually take the advice that you give them. So if you're doing advisory work, profit advisory, profit consultancy, always guarantee they'll be delighted by the advice that you do. Don't guarantee the outcome. But with tax planning, tax planning is different. Tax planning, we have an element of control. We. We're not reliant on the client doing something to get the result. It's us, we submit the claim forms, we have the correspondence with the tax authorities, and so we have an element of control over the process. The only thing we don't know is how the taxman will react. But very often, based on our experience, we have a pretty good idea. And so if we can guarantee the outcome in some way, if we can guarantee the result, then we can charge much higher prices. And this is the other reason why, in this particular case, I could probably have gone to 50%. I could have gone with 30 grand, not 12, because at the end of the day, I was still guaranteeing the client would get 30 grand. The client was not expecting me to help them get 60 grand back because it wasn't something they'd thought about until I came up with the idea. And who else would have done it? The only person that might have taken it on would have been David Smith and he'd have charged £500 an hour with all the risk associated. And they wouldn't have accepted that because that's a. For this father and son business, that was a crazy high hourly rate, so they'd have had no alternative. And is it fair to charge 50% in that case? Yes, because I'm taking all the risk. I have got all the risk that I won't get the outcome. Now, sometimes when I talk about guarantees and tax planning, people worry about guarantees because they worry. Yeah. But if I use this case as an example, I don't know whether I'll get this tax result or not. I didn't know if I'd get it or not. And so I could end up doing work and not get paid. Absolutely. But.

At any point, I knew as I created this guarantee and this proposal, I knew that at any point in time I could always contact the client and say, this is going nowhere, I'm not going to get the result. I did warn you that we probably wouldn't get a result and so I'm not going to pursue it anymore. But as I promised, there's no bill for you. So whilst we might be worried that we're opening ourselves up to thousands of costs, we can always stop whenever we want. We're still in control of the process. We can decide, you know what, we don't think we're going to get the result here. Let's stop the work. And if we think about, well, what have we lost? What have we lost? It's a few hours of work. It's not really cost as much. It's cost us a few hours of time investing in the client to try and get them some value, to try and get them extraordinary results. And sometimes we don't get that result. But think of it this way, with guarantees.

If.

I hadn't have got the client the result.

If I couldn't get them any money whatsoever, then how much value have I created for the client? None. I've created no value. So if we're pricing based on the hour, is it fair to charge a client for time that we spent when we haven't got the result? I don't think it is. I don't think that we can ethically charge clients for time we've spent if it's not delivered what we all hoped for.

And anyway.

Very often what might happen is if we bill a client for something and we'd not got the result, they're likely to complain. They might threaten to leave.

We might decide as a result of that, we give them a credit note and we give them some or all the money back because we haven't got the result. And the trouble with that is we've lost out all the marketing benefit up front of having a big guarantee, having a big promise. So I know I've spent a bit of time on that, on this particular point, but I think with tax planning, it's guarantees are really, really powerful if we can give some form of guarantee.

And give the client some level of certainty. So is there anything else? I don't think there's anything else I need to go through in this because I then went through the payment terms and a few other bits and pieces and then they signed it. What I did is I built in a PS because PS's are really powerful. It's the last thing that people then read. And I just reiterated the guarantee. Remember, if we're unable to secure a refund of more than 24,000, we'll reduce the fee to 50% of the refund received. As a result, there's absolutely no possibility whatsoever of this being a net cost to you. The worst that can happen is that we are not able to get you a refund and therefore won't bill you a single penny. So it costs you nothing. And in every other possible scenario you'll get a refund that is at least 200% of our fee could be as much as a 500% return investment. So the only way you can possibly lose is by not going ahead. So in the PSI rewords it as a return investment because it is, when you think about it, if you're building in a guarantee, what I'm saying to the client is I'm going to try and get you 60 grand back and you will invest £12,000 in that. Where else can anybody invest 12 grand with a return on investment of 500% with no downside whatsoever, with no risk? That's like, that's an incredible investment. And so when we, I said communication is really powerful. When we communicate the value in that way, as my client said to me, this is expensive, but I can't possibly lose. Yes, please go ahead.

So the client said, yes, I know I went in too cheap, but at the time I was delighted. This was my biggest fee. So what then happened? Because you're probably curious about the rest of the story. So I then wrote a letter, an email to the contributions agency and asked for the 60 grand back. We had a few exchange of emails. One of the things that really helped here was the judgment from their visit when they looked at my contracts for services.

To my amazement, to my amazement, within about two months they came back and agreed and refunded the 60,000 to my client. So I was pretty pleased with that. And the other thing was that the time I put on my timesheet for doing that was less than two grand. And even then I put double hourly rates because I had a second hourly rate for complex work. So this was not only my biggest fee that I'd ever had up to that point in time, but also the most profitable work I'd ever done. It was significantly more and it made me feel a little bit better about the earlier mistake with the contracts for services that I wrote. Now, interestingly, what happened with this Particular client was the father and son then had a falling out about a year later, and they fell out with each other. The son was disabled, he only had one leg.

And so they fell out. And back then, I think it's gone now. But one of the things that was available was retirement relief that you could claim on ill health grounds if you were. Because he wasn't old enough retirement relief, but you could also claim it on ill health grounds. And so he asked me, he said, my father's agreed to buy me out. I'm going to have this sum of money from the business, and is there anything I can do from a tax point of view? And again, I use exactly the same process for value pricing as I did that one. It was another very sizable fee for helping him get retirement relief. He was delighted in that particular case, I knew from my point of view, there's no risk whatsoever because this guy had one leg. It fitted exactly the rules of retirement relief. I knew the revenue had no grounds to say no to this.

But I still charged a premium fee based on the value and made a good profit on it. So because it's nothing to do with the time, the hours are irrelevant because it's not the hours I spent claiming the retirement relief. It was all the years I'd spent learning tax planning. And so the message I want to leave you with on this is that with tax planning, we have to remember that it's all of our years of experience, not the hours that we're spending on the individual project. Another point I want to make to you as well is going back to this whole idea of a guarantee is that sometimes we're going to lose out. Sometimes you will say to the client, I'm going to get. I can get this great result if I don't. We don't charge you. Sometimes we might lose out and we end up investing some time in the client to try and get them an outcome that we then can't bill for. But when we master value pricing, what you will find is that if you're good at tax planning, and hopefully you are, you will find that more often than not, you will get the result for the client. And when we charge based on value and make those super profits, that more than makes up for the few times when we don't get the result. And as I said earlier, if we don't get the result, we shouldn't charge the client anyway. We're not creating value. So more often than not, we will create much bigger profit opportunities. Now another question. Sometimes people say to Me, Mark, is Mark, is it ethical, is it fair to charge the client significant prices? I remember for example, a few years later teaching accountants how to value price incorporation work, moving a sole trade business into a corporate and most people in the profession charge a few hundred pounds, which I think is crazy and potentially negligent by the way. And when I taught this process and those of you that know me through AVN might know some of the stories, people who used to charge 3, 4, 500 pounds for incorporations were suddenly getting four, sometimes five figures. There was a sole practitioner in Birmingham who got £120,000 for an incorporation. And the reason the fee was that big was because the profits this sole trader partially was making was so big the tax benefits were huge. Is that unethical to charge those fees? Well.

If you've explained the fee and given the client a fixed fee and they've agreed to it and they can see there's value if the clients go into these things wide eyed. So why would it be unethical if the clients agreed and you're going to get a great result based on your experience, not the hours that you're spending? I would argue the opposite. If we go in too cheap, there's a danger that we're unethical because when we go in too cheap then we find we sometimes have to cut corners and we might miss stuff. And that's one of the reasons why people who charge 3, 4, 500 pounds for incorporations are bordering on negligence. Because if you incorporate a business, you're not just buying a company off the shelf. There are so many things to consider, transfer of going concern, chupy regulations, how do we move the assets across, when's the best time to cease and all these other factors that you can't possibly consider them all for just a few hundred pounds. So we owe it to our clients to be expensive so that we can leave no stone unturned and give them the best possible advice, best possible result.

And here's the thing that when we focus on value, when we value price, when we value price, what we then realize is that we can make more money as a firm when we make a bigger difference the lives of our clients. So if we're going to make more money by making a bigger difference to our clients, it now incentivizes, incentivizes us to spend more of our time just doing research.

One of the things that I would strongly recommend that, and I would do this if I was in practice again now was I would block out some time every week, every week to think about a client where I'd spend one to two hours away from the desk, away from emails, away from all those distractions, perhaps going to a coffee shop with a pen and a paper and a client in mind. I'd spend two hours thinking about that client. I'd ask myself some questions. How could I possibly help this client to save tax, to reduce their costs, to increase their revenue, to increase their profit, to improve their cash flow? Because when you look at your best clients, your A grade client, if you were to stop just for a couple of hours to just think, to just think.

You could come up with so many things that you could do to help that client. And to me, that's where we should be investing our time. Investing in the fact that we have this knowledge we can make a huge difference the lives of our clients. When we spend too much time because we're charging too little, running ourselves ragged just to get through the in tray of tax returns and compliance work and answering letters to HMRC and all that, if we're so busy because we're underpricing, we haven't got the time to step back and really think about our clients at a deeper level. Because one of the things I realized was that when I thought about my client base, when you stop and think, there are so many opportunities to help people that we sometimes miss R and D credits. For example, we should be looking every year at all of our unincorporated businesses and look at should they incorporate and review that every single year. When we are more focused and motivated by adding value, then we're also working in the best interest of our clients.