The power of setting and explaining minimum fees

The first question to consider here is whether you want all new clients to pay you at least a minimum fee.

This is a good question to ponder. In most cases I think your reply should be ‘yes’.

Where you set your minimum fees is up to you of course. As is whether you announce it publicly.

And the other key decision is when and how to approach those existing clients who are not (yet) paying the same (minimum) fees you charge new clients.

For some years I have been asking accountants if they have minimum fees.

This grew out of the annual fee comparison masterclass I used to run in the group that preceded the Sole Practice Club for Accountants.

Most of the members acknowledged that they did have minimum fees that all new clients would need to be prepared to pay.

Some would take on clients who only needed help completing a simple SA tax return each year. These accountants didn’t always have a minimum fee in mind for such work. As a result some such clients wouldn’t be profitable until year 2 or 3 (due to the time required to onboard them in year one).

On the other hand, some accountants would only take on new clients who were willing to pay annual fees of least £1,000.

I have asked the same question at accountancy conferences around the UK.

I remember the lowest figure I heard.

Up in Carlisle the average minimum fee around the room seemed to be about £250. But one accountant announced that his firm’s minimum fee was only £50.

Everyone else in the room turned to look at him in astonishment. I tried to reduce his obvious embarrassment.

Afterwards he thanked me for diffusing things. And also for making him think about minimum fees.

He had only said £50 as he knew one of his staff had agreed that fee to help a pensioner earlier in the week. He assured me that It wasn’t very common.

But my question, the responses in the room and his commercial ambitions had got him thinking.

He recognised that there are no real downsides to setting a minimum fee and getting his colleagues and staff to sign up to this. I suggested he involve them in the decision as to where to pitch the minimum fee.

That advice was due to having worked with firms where different parters and teams were at liberty to charge different fees such that any client could pay a lot more if their engagement partner was Mr A, compared with if it was Mr B.

Different types of work obviously warrant different minimum fees. By being clear about these you will avoid wasting time on prospects who are unwilling to pay what you know your work is worth.

All too often the new clients who think your fees are high, end up being problematic, slow payers or complain a lot.

One accountant I know took over another sole practitioner’s practice recently. There was no minimum fee previously.

Going forwards he wants it to be at least £350 pa and for the average annual fee paid by his new clients to be closer to £1,000.

For now his current focus is on securing the existing clients of the practice. And this could take some time.

Such conversations may be even more challenging if you have been acting for your ‘legacy’ clients for some time and are uncomfortable trying to increase their fees. It’s up to you of course if you want to be charitable – which is a polite way of saying ‘uncommercial’.

Many is the time I have coached accountants around such conversations and explanations of new fees for their ‘legacy’ clients

In the case in question I helped the accountant appreciate that his conversations with the clients he had taken over should take priority over signing up new clients who would only be paying £350 pa.

I suggested that for now he should only devote time to new clients who require services for which he could charge closer to the £1,000 pa he wanted to be his new average fee. He was grateful for the advice and agreed it made sense.

Many accountants I have worked with include reference to their minimum fees for different type of clients on their website. This helps discourage time wasters with an unrealistic idea as to the fees they will need to pay.

My advice is always to caveat such references to minimum fees. You don’t want fee conscious clients expecting that to be all they will pay regardless. So consider including a note along the lines that: Most of our clients are paying closer to [your target typical fee]. You might add an explanation as to why this works well for them and you.