I recently took my family and some clients to the Cayman Islands for a spring break vacation. The five-star resort where we stayed was very nice, as expected. But several of us came away feeling a little underwhelmed. Everyone had a good time and nothing went wrong. In fact, if we hadn't known it was a five-star resort, we would have said, "Great service and great experience" in our reviews. But because it was a five-star resort, we were expecting exceptional service, and from that perspective, the resort fell short.
If we'd stayed at a three-star hotel, we probably would've praised it as exceptional. But at five-star prices, you don't just expect "good" — you expect extraordinary. You expect the staff to greet you by name (with a smile). You expect thoughtful gestures for your kids. You expect the staff to anticipate your needs without being asked. At the five-star level, details aren't just nice touches; they're essential.
I bring this up because in these inflationary times, everyone's talking about raising prices. Accounting firms are no different. I'm not against raising prices, but I don't care how high the inflation rate is. If you raise prices without delivering more tangible to the client, your value goes down in the client's mind. If you want to charge three-star prices and deliver a three-star experience to clients, that's OK. But, if you want to start charging five-star prices, your client's expectations will adjust accordingly.
The good news is, it's not that hard to deliver more value for clients in terms of providing better communication, more proactive response time and better tools for clients, etc. But you must make sure clients are well aware of what you will be doing differently to deliver more proactive communication and advice, faster response time and better tools for them to use. If you don't, clients will just see a higher invoice than last year for the same level of service. Expectations will go up and satisfaction will go down.
Just like hotels and restaurants, when you move up the price ladder, you move up the expectations ladder. Your level of professionalism must go up. Your client response time must be faster. You must increase the level of proactive advice given to clients. When you're thinking about what kind of firm you want to be — i.e., a firm serving fewer clients at higher prices — you can't just deliver a tax return without any advice, feedback or recommendations like you did before. The tax return itself is a commodity. Most of the fee you add on top of it is service. More on that in a minute.
If you want to increase prices and serve fewer clients, think carefully about what you're going to do for them in order to be their most trusted advisor. All the levers you have at your disposal — tools, resources, proactive advice, response time, etc. — will have to move when prices move.
Think about the last time you researched a vacation. When you Googled hotels, did you notice the little box where you could filter for three-star resorts, four-star resorts, five-star resorts, etc.? The expectations you had for each type of resort was different based on the price point. Clients make the same mental calculation based on your pricing when deciding whether to stay with you or move up or down market for an alternative accounting firm. Again, you must align your prices with the expectations that come with those prices.
As accounting firms, we are essentially luxury service providers. Most of our clients are very intelligent, and if they had to, they could probably figure out how to do their own taxes. The luxury we provide them is saving them the headache of filling in endless rows and boxes, providing expert counsel on how to save money or buy more time, and most importantly, dealing directly with the IRS so they don't have to.
Again, you must align your prices with the expectations that come with those prices.
When my firm recently raised its fees, we told clients very clearly: "Here is our updated pricing model. We want to be more meaningful to you. We want to focus on the clients we work best with. This is your new, updated fee structure, and here are the additional things you will be getting from us." A few clients pushed back, but most did not.
Price is an automatic market positioner. If you want to charge $350 for a tax return, you are positioning yourself as a low-cost provider. Clients are not expecting much, and you don't have to provide much in the way of service or advice. But if you want to move up market and charge $2,000 for a simple return, people aren't really paying you $2,000 for the return itself. They're paying for access to a high-end professional who knows their situation intimately. No more than $400 of that $2,000 fee is for the tax return itself. Everything else is for the implied service you provide.
For more about going above and beyond for clients see my article
In a highly competitive market like professional services, you can't charge Ritz prices for Holiday Inn service. Don't get me wrong. There's nothing wrong with Holiday Inns. They're a great brand and a well-run operation just like Ritz. Both types of hotels are very intentional about what they charge and what you can expect when you stay there. They build well-honed systems and processes around what they can afford to deliver at their relative price points. No one's mad when they book a Holiday Inn. No one's mad when they book a Ritz. The friction only comes when their relative expectations aren't met.
What is your firm doing to deliver more value to clients? I'd
