A major challenge that we all face is the struggle to win new clients. It is important to know that you are not on your own in this. There is no silver bullet way of winning new clients but the question to ask is how do we stand the best chance of winning new clients?
We must understand and influence the laws of probability in our favour to win more clients than not win them.
So how can we combat lowballing against those competitors who offer a very poor service for a very cheap price? Here are the steps we can put in place to combat this problem.
What is Lowballing?
The low-ball is a persuasion and selling technique in which an item or service is offered at a lower price than is actually intended to be charged, after which the price is raised to increase profits.
Lowballing typically happens on compliance work, not advisory work. It occurs when the overheads are low or outsourced in trying to win work.
There have been many arguments over the years to make a case for lowballing as a way of building critical mass in the practice. I have never been convinced by any of these arguments. However, lowballing as you may or may not know, is still a very common tactic.
How Does Lowballing Work in Practice?
In some cases, the firm will try and up the prices in Year 2 or Year 3. Failing that, they may outsource the work to keep the price down or allocate the job to a junior member of staff, or even not offer that particular service. If you consider the client to be a layperson, then they would not know the difference between a great service and a poor service. They would purely look at it from a cost point of view.
A Lowball Case Study
We are in a scenario where we are quoting for share compliance work and to take over the compliance work from an existing provider. When the client is in the decision-making process, what do they consider?
They may consider the difference in terms of price and also how well they got on with you.
Ultimately it will come down to the price.
You may not have a lot of opportunities to differentiate or be superior, so if the proposal is purely about compliance work, that gives us two possibilities.
1. To influence the prospect by educating them on the difference between good service and poor service
2. From a price perspective, we show how we can add value to a simple compliance quote in terms of deliverability and service to the prospective client.
It is difficult because sometimes the financial budget restrictions negate any conversation about education in terms of a good versus poor service situation. Ultimately, they only have so much money and if they choose to go with the lowest bidder, seemingly there is not a lot we can do about it.
How to Avoid Lowballing
If you find your firm in that position, you need to be questioning whether your prospect is the type of client you want to build your practice with.
Your answer to that question might be that you have no choice because you are just starting up.
I suggest that you do actually have a choice and you need to ask yourself this, “Do you have the skill to win more than just compliance work on a price basis alone?”
In my experience, when I have asked a roomful of small to medium sized accountancy firms whether they believe their clients are with them because of price, no hands go up in the room. If you ask the same group of accountants whether they believe they lost their last client because of a cheaper quote somewhere else, then all the hands go up!
How is that possible if we never win on price but always lose on price? It cannot be possible. In practical terms, here’s what you can do:
- If there is a big issue about pricing within your firm, you may be fishing in a pond that is too small. It is time to look for a bigger pond and offer something more.
- Offer more than compliance and make those conversations with potential clients go way beyond the technical. Remember, the potential client will have no perception of an accountant beyond the technical compliance service that they know you can provide. So you are going to have to lead them.
- Take those clients through the reasons they started their business. Talk about their aspirations, their challenges and headaches, their competitive advantages in their business.
- Talk to them about all the things that are happening in their business currently and why they continue to be in business.
If you can discover all this knowledge about them, you can begin to work out how you can be of use to them beyond compliance alone. It is important to remember that where you can help may be something straightforward, such as management, accounts, and cash flow forecasting. These might be simple areas of business for us, but make a big difference to the business owner.
How Can we Combat Lowballing?
- Educate the client so they can make a truly informed decision, or offer a proposal that is completely different.
- The proposal that you offer would be superior to anything else they have already received.
If we compete purely on price, that is only going to go one way. Your margins will be eradicated and you will not enjoy what you do and become resentful.
How you decide to educate prospective clients or provide something superior is completely at your own discretion, including how you approach that conversation.
There may be other factors to consider for each individual case as well, but ultimately these two main factors are the most significant methods to combat lowballing.
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