Moving to a value pricing model isn't straightforward, but it’s a move that all firms need to consider as compliance becomes more automated and a larger focus in placed on advisory services.
To help outline the first steps of this transition, we spoke with Carla Caldwell at the recent Firm of the Future roadshow in Baltimore. As founder of Caldwell Consulting & Training, Carla has more experience than most helping accounting firms navigate this tough, but ultimately rewarding, journey.
What is value pricing?
Value-based pricing for accounting firms means pricing your services upfront, based on the perceived value that the client has for your services.
Instead of billing in arrears like accountants have traditionally been doing (hourly billing), you’re required to talk with your clients and discuss with them the services that they need, finding out what they perceive as that value, and then pricing that.
The benefits of value pricing
Carla says there are endless advantages of adopting a value-based pricing model, but outlines two main ones.
With this model, you’re not billing clients and needing to explain and justify the hours you spend. If you're doing this, it means that the harder you work and more efficient you get, the less money you make.
Value pricing removes that constraint, and rewards efficient and hard work.
Under this pricing model, you’ll also find you discuss things ahead of time and become more proactive and collaborative with your client.
It changes your entire discussion and relationship with a client—it’s not based purely on transaction anymore. It’s about collaborating and partnering with a client to help them grow and be successful in their business.
When your mindset and objectives change like this, it will ultimately benefit your practice and your clients.
Where do you start?
If your firm is moving to value-based pricing, you’ll need to have a lot of planning, strategizing and discussion around the move.
It’s a long journey, and it’s not always easy—I always encourage people to keep on keeping on.
To begin, Carla recommends setting up fixed pricing. This involves setting up bundles of services that you’re offering and creating fixed prices for these.
As you get comfortable with that fixed model, it will be easier to move on to value pricing, and you’ll be more comfortable with that. You’ll find that you’re going to get better and better at it as you go.