Let me tell you a little story about pricing professional services — there’s a lesson here for all of us.
I had more fun than you did this morning. That’s because I spent it sitting in my dentist’s chair, getting a temporary crown for my back molar where I had a root canal done a couple of years ago. (Those of you who are squeamish about the dentist, feel free to skip ahead to the fourth paragraph.) He started out by taking a wax impression of my tooth. Then he pulled out a drill that looked like something Laurence Olivier would have used in Marathon Man (“Is it safe?”), literally shaved the edges off my tooth, fashioned the temporary crown out of some nasty glop that kept sticking to my tongue, and cemented it in place until I come back for the permanent crown on September 13.
Oh, and while he was shaving down my back molar, the dentist noticed an old filling on another tooth. He mentioned that it looked worn and that there was a rough edge to it. Then he asked, “Do you have dental insurance?” I don’t — I pay my dental bills through my Section 105 plan — but that can’t possibly be good news when your dentist asks mid-procedure if you have dental insurance.
My mouth is still a bit numb as I write these words. And yes, I realize that’s TMI.
I don’t have a lot of “dental history.” I went to “Dr. N” all through my childhood and well into adulthood. He retired and sold his practice to “Dr. K,” which meant I could go to the same office for my routine teeth cleaning. And that’s all I needed until December, 2009, when my tooth started hurting. A lot. “Dr. K” took one look, said “you’re getting a root canal,” set me up with the endodontist the very next day, then told me to come back after the root canal for a crown — which would cost $1,250.
(I didn’t even ask what the root canal would cost. I was in so much pain that it just didn’t matter. In fact, I didn’t even find out it was $1,800 until I saw the actual bill — and at that point, I was so grateful, and so drugged up with Vicodin, that I paid it without blinking.)
When it came time to finally get the crown, though, it was a different story. That immediate pain was gone! I was comparing root canal notes with my sister, who told me that she had gone to the same endodontist for her root canal — but then paid a new dentist, “Dr. L,” just $850 for her crown.
So this morning, when it finally came time to get “crowned,” I went to Dr. L. Now, I wouldn’t have had a problem paying more to Dr. K, especially for something intended to last for the next 40 years, if I thought I was getting value for it. But in this case, she just quoted the premium fee, without actually making any case for premium value. And she lost her patient.
Here at TaxCoach, Keith and I talk constantly about communicating your value to your prospects and clients. People are willing to pay surprisingly large fees — sometimes even for surprisingly lousy services. But they have to believe they’re getting value first. And price is usually far less important to clients than you think.
If your client perceives that you, and the CPA across the street, and the EA around the corner, and the H&R Block across town all offer the same service, and all deliver the same value, well, you’re all apples. And that means you’re subject to all sorts of “apples to apples” comparisons on factors like hours, location, and, of course, price.
But if you communicate superior value to your clients, and show them you’re an orange instead of an apple, none of those apples-to-apples comparisons apply. If you show your clients you’re an orange, you can charge whatever you like as long as you show them your fee is a good value.
Dr. K might have offered something to make her higher fee worthwhile. But she didn’t. And then I got a referral to Dr. L. And since Dr. K looked like just another apple, well, she lost an apples-to-apples comparison. Be sure you don’t make the same mistake with your tax patients!