Does your accounting firm pricing strategy support sustainable growth?

What’s the real cost of undervaluing your work?

For accounting firms, outdated pricing strategies can erode profit margins and compromise the level of service clients expect. Clients' needs are growing more complex and additional services are becoming the norm, so firm owners must think of pricing beyond hourly rates.

Modern accounting firms need a sustainable pricing approach, as it allows them to not only cover overhead costs but also support long-term relationships with clients. When your pricing is aligned with the value you provide, you can attract prospective clients and maintain profitability without ever compromising on your service quality.

Why rethinking your pricing strategy is essential for growth

The market grows more competitive by the day. For a firm owner, that means sticking to traditional pricing models like hourly billing can impede growth.

Client expectations are constantly changing too, forcing accounting firms to stay on their toes with their approach to pricing.

Services like tax planning and bookkeeping have become more complex, requiring higher service levels and more expertise. If your pricing model doesn’t reflect this complexity, it can lead to undervaluation and strain client relationships.

As a firm owner, you need to see these signs as early as possible. You need to ask yourself if your pricing still reflects the value you provide.

At my firm, Leichter Accounting Services, we recognized this shift early on. Our traditional pricing model wasn't fully capturing the value we were providing.

As we expanded our services in our firm, especially with more customized solutions for clients, it became clear that our pricing didn’t align with the increasing complexity and expertise involved in our work.

Additionally, client expectations were changing, and we wanted to be proactive rather than reactive.

From there, we made a careful yet decisive move toward value-based pricing.

This turned out to be one of the best decisions we've ever made, as it allowed us to better communicate the benefits of our services to potential clients and meet the specific needs of our target market.

The result? Improved profitability and reinforced long-term client relationships. We made sure that fees were tied to outcomes, not just hours worked.

Here’s a breakdown of three key pricing models, including their pros and cons, and my suggestions for when to use each.

Key pricing models for accounting firms

Time-based pricing (hourly billing)

Your firm and most clients are very likely familiar with hourly pricing. It's one of the most common pricing strategies for accountants, where clients are billed based on the number of hours worked.

This method is straightforward to many clients, making it easier to justify costs, especially for bookkeeping services or financial statements.

• Pros: It’s simple and transparent. Clients understand exactly what they’re paying for, and there’s flexibility if the scope changes.

• Cons: Hourly pricing can lead to inefficiency, as there’s no incentive to work faster. It also opens the door to scope creep, which can strain client relationships.

• When to use it: Time-based pricing works best for short-term projects or when the scope is unclear, but it can become less effective for long-term engagements that involve more complex services like financial planning.

Fixed-fee pricing

Fixed-fee pricing involves charging a set amount for a specific service, regardless of the time involved. This method eliminates uncertainty for both your firm and your client, allowing for better budgeting.

• Pros: Clients appreciate knowing their costs upfront, and your firm benefits from a steady, predictable income. It also prevents disputes over time tracking.

• Cons: Without careful planning, fixed fees can lead to undercharging if the project takes longer than anticipated. It also requires a solid understanding of the scope to avoid financial losses.

• When to use it: Fixed fees are ideal for routine services like financial statements or tax filings, where the scope and time requirements are well-defined.

Value-based pricing

The value-based pricing model focuses on the outcome or value provided to the client, rather than the time spent. This is the model we use in our firm.

This method allows accounting firms to charge a premium price for high-impact services like financial planning, as fees are tied to results.

• Pros: Value-based pricing captures the true benefit your firm brings to clients, which can significantly increase profitability. It also helps strengthen client relationships by focusing on outcomes rather than hours worked.

• Cons: It requires a deep understanding of client needs. It may be harder to justify in competitive markets where clients compare pricing options based on hours or fixed fees.

• When to use it: Value-based pricing is best for firms providing complex or highly personalized services, where the impact on the client’s business is substantial. It’s a forward-thinking strategy that supports long-term growth objectives and enables your firm to provide a higher level of service.

Whatever pricing strategy you choose, here's the most important thing to keep in mind: it should reflect the scalability of your firm.

As you grow, you want to be not only covering costs but also investing in technology, training, and services that will help you serve clients more efficiently.

By aligning pricing with the value you provide and focusing on sustainable growth, you can attract high-quality clients while maintaining the integrity of your services.

Tips for building your pricing strategy

Focus on value, not cost

Many firms worry about client backlash when they adjust their pricing.

The key is to focus on value, not just cost. Highlight the tangible benefits your clients will receive—such as financial savings, improved compliance, or more personalized financial reporting—to make justifying higher prices easier.

Shifting from a cost-centered approach to one that emphasizes added value makes it easier for clients to understand why you're increasing your fees. As an added bonus, it strengthens their trust in your firm’s business model.

Listen to client feedback

Client feedback is crucial to refining your pricing methods.

Regular feedback reassures clients that they’re getting good value for the fees they pay. Whether you offer individual services or a monthly package, asking clients how they perceive your pricing helps you adapt to their preferences and avoid common pricing challenges.

This ongoing dialogue allows you to fine-tune pricing accounting services in a way that achieves client satisfaction and supports your ideal profit margin.

Communicate, communicate, communicate

Do you know what the defining characteristic of a great accounting firm owner is?

It’s not the ability to balance books at lightning speed—it’s communication.

Internal resistance often comes from the fear of losing clients and discomfort with raising prices. By learning to communicate effectively, you can hit two birds with one stone: easing your team’s concerns and addressing any hesitation from your clients.

You should also support your message with real metrics like cost savings or compliance improvements to show clients the tangible benefits they’re getting. Provide ample notice and engage in open conversations, encouraging clients to ask questions and share any concerns.

Finally, training your team on how to communicate the value behind the price changes will also help alleviate client concerns.

Your firm's success starts with the right pricing strategy

Approaching pricing changes from a value-driven perspective is the key to long-term growth. Instead of fearing client backlash, focus on how your firm’s services can better meet their needs. This worked for us in my firm, Leichter Accounting Services, and you can make it work for you as well.

Open, honest communication, and a clear articulation of the benefits your clients receive from your services can help ease concerns. Remember, clients often expect prices to increase over time if the value they’re receiving grows too.