How do I establish a fixed price for a client, other than by "eyeballing" the work?
Ideally, I'd estimate the number of transactions per week/month and multiply it by a price per transaction, then add fees for preparing various returns (sales tax, payroll taxes, etc.), tack on a bit for travel time, and come up with a number.
I wouldn't present any of this to the client as a price list, I'd just use it to estimate what my fixed fee should be.
Any suggestions as to how such an estimate should be put together, or what rates should be used? (I'm in a market where bookkeepers are in demand and fairly well paid.)
Thanks for any help you can offer. I've been a bookkeeper for years, but always working for one employer. I've never freelanced before.
-- Edited by TMe on Thursday 17th of December 2009 05:07:44 PM
-- Edited by TMe on Thursday 17th of December 2009 05:10:36 PM
The way I do it is by working out first how many, on average transactions you can do in an hour, divide that by how much you wish to earn per hour. I split the transactions into bands so 1-20 transactions is £x, 21-40 transactions is £x. Then I add extra depending on turnover and whether they are VAT registered. I also add extra depending on the legal status of the business. I provide almost a standard report, If they require additional reports then I can add extra fees for that too.
It's not foolproof, but I think over time you adjust your calculations. I have seriously under priced some jobs and over priced others, but now I think I have managed to strike a balance.
I think its really about knowing yourself and your market and knowing exactly what value you add to their business. If you under price yourself you'll learn, very quickly!
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
Rather than think internally consider the value to the client. How much time do they spend? What is their time worth? How will they use the bookkeeping information? What will that mean for them?
In terms of a "walk-away-rate" you need to calculate what you want from your business. If the recovery rate matches this then the price is right (for you).
We have priced work with an effective fee of between 50p and £10...it all depends.
BobHarper wrote:...it all depends. That's not terribly helpful.
The more bookkeepers I speak with, the more it seems hardly any of them have any rational method for estimating jobs. Either they charge by the hour, they pull a number out of thin air, or they ask the customer to set the price.
Of all people, I would have expected bookkeepers to have a more rational, quantifiable approach to estimating.
I think you'll find that both Bob and I have a perfectly rational way of pricing our Jobs. It's just that Bob talks a bit more cryptically than me. But I've no doubt if you give him about £8k he'll spell it out for you ;)
Other than that we have both tried to be as helpful as we could. Ultimately all we can give is advice, you need to work out what works for you. No one can do this for you.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
...we have both tried to be as helpful as we could.
Thanks. I was only commenting on the phrase "...it all depends". Not the rest of Bob Harper's post, and not at all on your post.
I'm familiar with Bob's approach, and I've seen it work well for others, but it's not for me. It's basically "eyeballing" the customer instead of eyeballing the job. That approach takes lots of experience which I don't have. (I have lots of bookkeeping experience, but not as a freelancer.)
Your approach sounds pretty close to what I had imagined. I've been advised that I should never give a client a fixed "price list", though. Instead I should use that method for providing an estimate or a fixed price and keep the calculations to myself.
Your thoughts?
Here's another question. How should I vary my billing for someone that hands me six years worth of receipts, most of which are irrelevant garbage, and none of which are sorted? (As opposed to someone who gives me their reciepts sorted by vendor and date.) Is that something I'd just have to eyeball?
-- Edited by TMe on Thursday 24th of December 2009 02:29:18 PM
I do assess the job, but I think I also assess the person too. I have a few clients who although the workload is pretty similar they all have vastly different turnovers. This is where Bob's worth comes into play. I can charge some more than others for the same work as the value they perceive from my work is vastly different.
So although I have a pricing structure predefined it has to be very fluid too, there are some people who bite my hand off for a £45 per month price and others who may have less work involved would run a mile if you said £45 as they would see this as far too cheap and perceive that they may not be getting a quality service.
I would never publicise my pricing structure to clients. Neither would I go into it to deeply with others.
Your six years of receipts question is one I cant really help much with. All I can say is that to be able to offer a fixed fee service and get a decent return for yourself I would suggest you target specific types of client. I also have some information that I provide my clients of how I would like to receive their paperwork. I explain that what I need them to do isn't complex and all it takes is for them to get familiar with a simple system. I explain that to benefit from a great fixed fee they need to put in just a little work. To begin with I thought they would never do it, but went with it anyway. I have not had one refuse or leave because of it.
You could accept the shoe box of receipts, but I think you sometimes need to be picky about the clients you take on or you could end up a busy fool doing work for the equivalent of £4 per hour.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
kjmcculloch wrote:You could accept the shoe box of receipts, but I think you sometimes need to be picky about the clients you take on or you could end up a busy fool doing work for the equivalent of £4 per hour.
That sounds about right. I'm thinking the person who simply can't bring themselves to sort their receipts is the same person who's going to argue about the bill.
Unfortunately, there are SO many people like that in my market. They're mostly self employed people who gather all their paper in a big garbage bag and then want someone to make the mess disappear at the end of the year.
For those people, I'd like to negotiate a price up front and sign a contract before I do any work. That way there's no shock and (hopefully) no argument when they get the bill.
I agree with you there are many people like you describe but if you look around there are also many who do not mind doing a little work for a fixed rate. In my experience many of the people with a years worth of receipts only actually approach you out of blind panic when they know they only have a week to get their self assessment in, or even worse it's overdue. So not only are you dealing with a years accounts they're pushing you to do it in a day.
You are the only person who can decide if this is worth it.
The views expressed in this post are my own personal (HRA protected) views, and are not representative of any organisation I have any involvement with.
kjmcculloch wrote:...In my experience many of the people with a years worth of receipts only actually approach you out of blind panic when they know they only have a week to get their self assessment in, or even worse it's overdue...
You are the only person who can decide if this is worth it.
More typically, it's people who've received letters threatening court action because they haven't filed taxes for the last five years.
There's no way I'd handle their books without charging a premium, and they understand that, but I'd like to settle on a price before I do the work, rather than negotiate with an innumerate person after the work is done.
A buddy of mine asks his clients flat out "What do you think it's worth?" If a client suggests a number bigger than what he had in mind, he says "Fine, that's what I'll charge." If not, he talks to them about ways they can reduce the fee. Eventually, they'll do a lot of the work themselves, agree to a higher fee, or go away.
My big problem, because of my lack of freelancing experience, is that I'm not very good at estimating how long a job is going to take. People like my buddy, who just "eyeball" jobs, can't explain in any meaningful way how they do that.
-- Edited by TMe on Saturday 26th of December 2009 04:45:32 PM
