The Price Is Right! How to Get the Right Fees for the Job

My latest home-improvement project is focused on the landscaping of my house, and I found our vendor through a well-known third-party referral site.  Their landscaping service business has a similar structure to that of an accounting firm:  they have a couple of partners who manage the business and get involved in high-level decisions; they have a manager who is responsible for sales and the day-to-day management of the engagement; and they have a “staff” team that executes the contract.

The quality of work has been outstanding, but I have been frustrated by the lack of detail provided in the initial quote, and even MORE frustrated when they have tried to bill me for work AFTER it has been completed without any prior conversation to warn me that we have gone out of scope.  You’ve likely had a similar experience to this one – either as a client or as a service provider – and you know the horrible feelings that linger after the engagement.  Here are some tips for avoiding these pricing mistakes, so that resentment won’t overshadow the great work you do.

Have the right people involved in scoping the work.

Proper scoping of an engagement keeps the work on track and ensures you get paid the right amount for the work.  One pitfall we see in many firms is that partners will ask managers to put together the budget for a job, but those managers aren’t involved in the initial needs assessment or scoping conversations with the partners.  Partners can help managers learn to build more accurate budgets by inviting them into the conversation early – before the proposal is discussed with the client.  Partners should train managers on listening for key language that will help them understand the full range of potential services the prospect or client may need.

Have early discussions around additional fees for out-of-scope work.

Typically, clients are reasonable people, and they will work with you on pricing.   Oftentimes, they own or run businesses and understand the importance of paying the right amount for services.  Sometimes a client will come back with a request for services that clearly fall beyond the scope of the initial agreement.  Many firms will end up writing off these services, either explaining that it’s part of providing “exceptional service” or not knowing how to ask for more money to cover the services rendered.  In most cases, if you communicate early with a client to explain that their request is beyond the initial scope and then provide revised pricing, the client will be happy to pay the extra amount.  But a word of caution:  this is where proper scoping is critical to the client relationship.  If you go back too often to change the scope of work, either the client will feel like you didn’t fully understand their needs or they might feel that you are trying to nickel-and-dime them.  If the request is truly outside of any other conversations that have taken place, we recommend creating a new contract to keep track of the different services and pricing.

Avoid potential headaches by converting to value billing.

The concept of value billing has been a hot topic of conversation for helping firms transition from delivering compliance work to becoming consultants.  One way to avoid some of the uncomfortable conversations that come from requesting more fees is to propose a fee upfront that encompasses the value of the work beyond just hours multiplied by dollars.  Value pricing requires good scoping skills and gives you room for accommodating reasonable requests.  There are still challenges with value pricing (see our article about pricing strategy), but if you get in front of some of the obvious pitfalls, you are more likely to get paid the right amount for the job.