Practice barrier #6: value pricing & bundling
The debate between billable hours and value pricing is a hot topic. An increasing number of accounting firms are making the transition from charging by the hour, to charging by the value they perceive their client is receiving.
Advancements in technology have helped you become more efficient, meaning that if you are still charging by the hour, you are delivering more to your clients for less money than they may have paid previously. To increase revenue while sticking with an hourly billing model, you need to either invent more hours in the day or continually raise your hourly price—running the risk of alienating a big chunk of your client base.
The truth is, clients aren’t worried about how long it takes you to complete a task, or even how you do it. They only care about the final result—the value they receive from the work you have put in. Which is why value pricing and bundling is an obvious strategy to boost your bottom line.
The challenge though, can be persuading your clients to agree to it.
How does it impact you?
Moving to a value pricing model is a complex and involved journey. It’s no wonder so many accountants identify this as a major barrier. Many that attempt to make the transition often find themselves setting fixed fees—a set price for each service offering—as opposed to a true value pricing model—determining the price on a client-by-client basis and the value you will deliver them. Fixed fees can be an effective model, but it doesn’t offer the same flexibility as value pricing.
On your value pricing journey you might find yourself confronting obstacles when understanding who your customer is, what their perception of value will be, and being able to articulate this to them, and finally getting to the stage when you can both agree on how much they will pay for the service you will provide.
Ensuring you can handle each of these stages is essential.
What can you do about it?
Use the power of threes
One of the hardest elements of value pricing is understanding how to package services in a way that will be easy for your clients to choose from while still providing the highest value to your firm.
The “power of threes” is one useful strategy. It refers to the universal truth that the vast majority, when served three different options, will gravitate towards the middle option (think Goldilocks and the Three Bears—the middle option is just right). The same technique can be used when planning your value pricing model.
Use the technique to think about which of your offerings are truly important, and what a client might consider more of a luxury. It will help you understand why your customers may be drawn to one package over another, and what they consider the most important.
When thinking about how much your services are worth, consider what the lowest price is that you would charge for a particular service bundle, and what price would make you scream from the rooftops in excitement. Going through this process carefully will give you the framework to create the pricing variation, and help you determine what you are comfortable with.
You can also use this technique when it gets to the stage of selling your bundles to a client.
Nail the conversation
Accountants who handle the conversation with their clients well all have one thing in common—they listen. They sit back and ask the right probing questions that draw out the necessary information.
You need to ask your client to describe what they are struggling with, where they want to go and make them realise why they need your help. Getting into the habit of this might even help turn those once-a-year tax clients into an ongoing customer.
If you are equipped with this information it will be much easier to convince your client that you can solve their problems, and show the value you will be able to provide to them.
Review yourself each time
Value pricing is a never-ending process of iteration and improvement. At the conclusion of each conversation, meeting, agreement or job you need to ask yourself what you could have improved. Think about what you could have done better for your firm and for your client.
The value pricing journey—like accounting as a career—is all about learning. For it to be successful you must constantly seek to improve yourself.
If you are unsure of anything or find yourself hitting the same roadblocks, reach out to others for ideas and advice. Your accounting peers are a wealth of information, but it’s also worth looking beyond your industry. The value-pricing trend is not unique to accounting, with many other specialized professional services facing the same challenges and opportunities.
There are many more steps to moving toward a value pricing model than we can fit into a piece such as this. To gain a thorough insight we recommend exploring the links in the article and watching the below recording.https://fast.wistia.net/embed/iframe/24ph6v0avm?class=center&thumbnail=https%3A%2F%2Fembed-ssl.wistia.com%2Fdeliveries%2F3d751de2d1755438e023ff3799b1c4a55c39de9f.jpg%3Fimage_crop_resized
If you are struggling to grow your firm, we challenge you to implement at least one of these ideas. If you do, we’d love to hear the progress and result. You can also reach out so one of our advisors can help you out.
Also, if your firm has implemented any other strategies to transition to a value pricing model, we’d love to hear from you.