The Hard Truth About Unprofitable Big Clients (And How to Fix It with Value Pricing)

What do you do when your largest client is really pushing back on prices and is perhaps not even profitable? This is a really big issue that we need to solve. And it was a question that I was asked by a member of the Value Pricing Academy called Darlene. What she said was, my clients have been paying me at a below market hourly rate for the consultation and accounting services that I provide. On top of that, my largest client caps my monthly charges. When I mentioned monthly flat rate to him, he lit up. But I need to either reduce my hours or charge a monthly rate higher than what he has been paying to be at Value Pricing. Any suggestions on how to tackle would be tremendously appreciated. Of note, my project for the weekend is to read the book Implementing Value Pricing by Ron Baker. Have you read it? And yes, I have, and I love Ron's books. He is one of my heroes, a good friend of mine, and it was him that introduced me to value pricing. Okay, so let's address this issue. So Darlene's largest client is causing a problem. She's not earning enough from them. And I think about my own story because when I started my accounting firm back in 1996, I didn't know how to price. And a couple of years in I won a big client, at least a big client for me, and it was a great client. I got on with them really well. But. But I soon realized they asked me they were a big client because they asked me to do more than the end of year work and the taxes. They wanted me to do monthly management reports. And it was great. I charged a price that was my highest price. It became my biggest client. Unfortunately, I then realized that as I did the work, their books and records were a mess. It was back in the day before cloud accounting. So there's lots of manual ledgers, lots of errors, and every month I spent hours on this client. It soon became a nightmare. But it was my biggest client by some way. And so this becomes a problem because it's a huge problem if you have a large client that becomes a big proportion of your overall fees because then you are creating risk in your business. If you are reliant on one or two big clients, there is a huge risk because if you lose your largest client or client, you could see a huge reduction in your fee income, which could cause all sorts of problems with cash flow and profitability. So my first tip is this. What you want to make sure is that in your firm you are not overly reliant on any one particular client. You should build a firm where all of your clients are fairly similar, and therefore, if you lose one or two, it's not going to make a big difference. So what do you do though, if you have got a large client like this and you know you need to charge higher prices because you're not making money? Well, unfortunately, this is the hard bit. You must be prepared to walk away. We must always be confident of the value that we give. And if we know that they're not perceiving that value, if they're not prepared to pay for that value, we must be prepared to walk away. Now, in the case of my particular client, I lost them a few years later because my service levels went down, partly because I just wasn't making money on them. I also had another client I picked up more recently that was of a similar size. I had two big clients and I lost them both within a matter of months of each other. And I remember when I lost each of them, I was distraught. I thought, this is the end, this is a real problem. Fortunately for me, by the time that I did lose them, I discovered value pricing. And losing those two big clients where I did regular monthly work, actually freed up a huge amount of resource, a huge amount of time. And because I discovered value pricing back then, I was winning brand new clients. And I realized that actually very soon I replaced that work. And within a matter of six months, I was back to where I was before, making the same level of fees, but with a lot less stress, a lot less hassle. So the number one tip is be prepared to walk away. If you are not making money from your largest client and they're not willing to pay you more, that's holding you back, that's causing you problems. Your time is precious. You need to free up resource. You will soon pick up other business that will pay the prices that you deserve. Second issue is when you have a low price, it creates an anchor, and that makes it harder to get a higher price later. So when I think of my story, my first client, it was the first client that wanted me to do monthly management reports. I was so excited because that would mean monthly revenue. I was an accountant, I ran accounting practice. So I had clients that wanted annual tax returns, annual financial statements. It was annual work in the main. This is my first client that would be monthly, doing monthly reports. And so it seemed to be a big fee that I got. But I completely underestimated the amount of work. And that fee I presented then created this expectation, this anchor that then made it harder to get the right price because I needed to Quite frankly, I need to double the price. I had to be double to be making a profit on this client. And it's really hard to double your price when you start off way too low. So please be aware, you should not be charging low prices. Next idea here is that you need to be aware that value pricing means focusing on outcomes. And Darling talked a lot about value pricing. We should be value pricing and that means focusing on outcomes, not hours. So then when we have the conversation with the client, we want to make sure in our value conversation we are talking more about the end results. What is the outcome of what we will do? That's much more important than what we will do. The hours we'll spend. The client doesn't care how many hours you spend doing the work. The client cares about the result that you are going to get. So if you have a situation with a large client and you have to reprice them, then in the conversation focus on the result that you will generate for them. And then the next idea is one that I always advocate because it's so powerful is use packages present different options, ideally three different options. Have one option which is the current level of support, an option which is one what they're currently getting but at a higher price. Then you present another option which is at a similar price to what you've currently got, but much less stuff. You take stuff out, it's a cut down one. And then you create a third option which is a premium one. You create a much higher price one with other things that you know would benefit them. That higher price one creates an anchor. So now they have a simple choice. They could of course go for the high price one, but. And that would be great if they do. But most likely they'll be weighing up between two things and that is, do they want to keep the price and therefore have to accept less work, or do they want you to carry on doing what you've always done in the past, but now that you've communicated the value better and the outcomes and the results, they will now pay you more, they're likely to pick one of those two, both of which are a better option. Either the same price for less work is better than what you've currently got, or even better still a much higher price for the same work is even better. And who knows, they might even go for your super premium one. So you might use a phrase, you might say something like, I can reduce what I do to fit the old budget if that's what they're asking for, or I can keep delivering the current level of value at the new monthly price. What we're doing is we're giving control back to the client. We're letting them choose which one do they want the same package but they're going to have to pay more or do they want to keep the same price and they'll get a lot less? People love to be in control and because you've created in your this mindset that you are prepared to walk away, the worst that can happen is, yep, you have to walk away. And that means you can now focus that time you've gained on winning more clients. If you found that valuable, could you first of all please hit the thumbs up button to say you like it? But could you also let me know in the comments below what is the key insight that you've got from this video? And do you have this sort of challenge? Do you have certain clients in your practice that you know you have to put the price up significantly but there's something holding you back from doing it? Perhaps it is because they are a large client. Let me know in the comments and perhaps I can do another video sometime to help you with your specific issue. This video that you just watched is an example of the sorts of videos that we put in the Value Pricing Academy on our school platform and if you want to be part of that, you can join for free and we'll put the link below. You can join for free and be part of a community of accounting professionals looking to improve their pricing on this value pricing journey and a place where you can ask me and my team questions. So once again, thank you so much for watching and I hope to see you inside the Value Pricing Academy. Bye for now.