A professional – which includes accountants and bookkeepers – is someone who is responsible for achieving a result, rather than performing a task.
That’s how we should be thinking about ourselves as accountants, but at the moment we charge for services – we charge for procedures we perform, but that’s really not what the customers are buying. They want results. So here are four steps to align pricing with results for success for both you and your clients.
1. Focus on the outcome – and offer choices
What is the customer trying to achieve? What is their preferred vision of the future? Here’s where you need to focus on the outcome, and that means giving your customers choices.
Offer 3 price points
Humans like choice – usually three, maybe even four, but start out with three options. It’s so well established that professional pricers call it Goldilocks pricing, because most people gravitate towards the middle. We don’t like the extremes, so we figure the safest choice is probably the one in the middle. The cheapest one might not have everything I want, and the most expensive one probably has too many things that I would never be able to use. So if there was a middle option, I’d probably just go for that. And it would probably serve me just fine. So giving people choices is really important. In fact, I would bet that where you get your car washed, you see choices.
From a pricing perspective, what we’re doing with choice is we’re understanding that there’s not one optimal price for a customer. There’s a range of optimal prices. And our job is to search that range. This might seem counterintuitive. A better way of saying it might be to say that there is a range of acceptable prices that a customer is willing to pay. It’s not a science, it’s an art, which means it lends itself to creativity.
Find other ways to give options
It’s actually quite fun to create three options for every customer. Think about what we do with the hour, the billable hour. If we ran restaurants, we would just bring out the food we thought was good for them, we wouldn’t give them a choice. But by giving options, like a menu, showcasing other things that you can do for that client, even if they don’t buy it now, maybe next year, they’ll go for the middle version, or the top version. Just keep putting it in front of them every year and showing them what you can offer.
The other ways you can construct choices include payment terms, like offering the choice to pay upfront or monthly, or you can adjust your turnaround time – usually time is of some consequence to customers.
2. Price the customer, not the services
Before you start work, you should estimate how long a job is going to take. You don’t need timesheet data to know how long things will take, and clients actually value when you finish work more quickly. You can pad it by 10%, to give yourself some wiggle room, in case there is scope creep.
But there are also some specific strategies you can use to increase your value. Most people are willing to pay more for a fixed price. People like certainty and predictability, and to be able to budget what you’re going to cost every month. So go ahead and add somewhere between 10 and 20%, to the project rate.
Remember, pricing takes place up front, not after the fact and that is worth something, it’s worth something to the customer to know that you’re never going to do more work than they’ve authorised and be surprised by a bill. Because all the pricing has been upfront, it’s been transparent.
A service that is guaranteed is also worth more than a service that is not guaranteed. Provide them with unlimited access, never put a clock on a meeting or a phone call. Tell them ‘You can call us or meet with us anytime, anywhere, to discuss anything’.
Now, we have access to tools like Dext Precision which allow you to get an understanding of the state of a client’s books before agreeing pricing, and a whole range of other time-saving tools that – combined – make it deeply unwise to charge by the hour. The time it takes to do anything also goes down because of your learning curve. Over time, you get more efficient the more you do something, and to charge by the hour means that your hourly rate has to grow at a faster clip than your efficiency.
3. Guarantee your work
Make it explicit that your work is guaranteed to the complete delight of the customer. This is going to give your customers an incentive to complain – but most customers won’t complain, they’ll just walk away, because they don’t think complaining will do any good. And if you incentivise them to complain, as a guarantee does, they’ll let you know about a problem. Hopefully, then, you can fix it. It gives us a chance to fix systemic problems in our service delivery.
And by making it explicit like this, you can charge a premium. And I think that price premium is about 15 to 30%, over and above your best competitor, if they don’t offer a guarantee.
4. Choose your clients wisely
There are a finite number of price objections. And as accountants and bookkeepers, you should have answers to all of them. Prepare for the question, ‘Why are you 50% more than the other firm I just talked to?’ Because we offer a fixed price, because we have a value guarantee. Because we structure your payment terms. Because you’ll never be surprised by a bill from our firm. You can call us or meet with us anytime you want. These are points of differentiation that separate you from the firm down the street that’s charging one half of what you are. Do not let your dumbest competitor set your price.
When you’re meeting with a customer, here are some warning signs that should cause your antenna to go up: if the customer’s only consideration is price, or if the customer keeps talking to you in the early phases about how important price is. Please don’t take these types of customers. These price buyers are the least loyal. As soon as they find it somewhere cheaper, they will leave; they have no loyalty whatsoever.
If the customer never asks you about the price, that isn’t ideal either. They probably have no intention of paying you. Price is always important, but it’s important relative to value. If this customer asks a lot of questions, they just might be using you as an unpaid consultant.
And if the customer complains about the previous accountant, next year you’re going to be the guy or gal they’re complaining about. So those are some of the warning signs.
If you follow these four principles, you will begin to create more value for your customers, and capture more profitability for your firm.