I’m asked all the time about the best pricing strategies for accountants and CPAs.
Choosing the best pricing strategies for your firm is one of the most important decisions that you can make! It tells people about how you approach your business and has the potential to set you apart from the beginning.
You want a better life, right? Higher paying clients, fewer working hours, less stress – all this sounds good, right?
Would you believe me when I tell you that all of this is impacted by which pricing strategy you choose?
Why is the Pricing Strategy Important?
This is one of the most often asked questions I hear. Since they don’t know the best pricing strategies for accountants, they often price based on what they’ve been taught, or what they see around them.
The problem is, this can be a huge mistake. Your pricing model will define almost everything about your business! The kinds of clients you attract, how many hours you will have to work in order to make the profits that you want – it impacts so much! Let’s take a look at best pricing strategies for accountants, and see how they can impact your business.
Pricing Strategy #1: Hourly Pricing
This is a one of the commonly used pricing strategies for accountants – you’ve probably seen it, or it may be YOUR pricing model!
In hourly pricing, you send your clients a bill for the number of hours that you worked. They don’t really know what you did during those hours – and honestly, they don’t care what you did, as long as they know the end result.
They may argue with you over some of the pricing – I mean, if you bill them for hours spent researching, they might ask why! Hourly pricing doesn’t always allow you to gain the knowledge to do your job the best that you can!
Hourly pricing can have its drawbacks. You have 24 hours in a day. That’s it.
So if you charge by the hour, you will only have a certain number of hours until you will not be able to do anything else.
What if you could take that time, and charge that time multiple times?
For example, one accountant found that she was receiving the same questions over and over from her clients. She took the time to create what she called “Handy Handouts.” This set of documents outlined everything that her clients needed to know for their business: and she sold the document packet for a thousand dollars! She was able to turn those hours spent compiling that data into hours that she was paid for over and over again.
The problem is, in our world, how often do we repeat the same work? I’ve never done a tax return the same for a person – they’re all unique! It’s rare to find work that can be done in the hourly pricing model and applied to multiple clients.
Remember, once you use that hour, it’s gone – and you’ll never get paid for it again under an hourly pricing model.
Pricing Strategy #2: Flat Fee Pricing, or Project Based Pricing
This pricing strategy takes a project and charges a flat rate from start to completion. It may take into account particular forms used for filing, or how complicated a project is.
Unfortunately, flat rate pricing often takes a cue from hourly pricing.
See, accountants will often estimate how long it’s going to take to do a project or how complicated it is. They’ll use that hourly estimate to draw up the estimate.
Some may call flat fee pricing “valued based pricing,” but I believe that they differ – you’ll see more below.
Pricing Strategy #3: Retainer Pricing
Retainer-based pricing is like a maintenance plan for your clients. You take a look at their needs and bill them for a monthly rate.
Some accountants and CPAs use this model for bookkeeping – they have an idea of how long it’s going to take to go through the books, and they bill from that.
But do you see what’s sneaking in and influencing that pricing? That’s right – TIME. This still takes a cue from hourly-based rates.
Retainer pricing is nice, and a lot of people like it because it’s steady. Its security and means that you’ve got a “steady paycheck.” But what happens if they need more from you?
Of course, you can add on, but we all know that there are clients who don’t like to pay more. It’s easy to lose sight of the value that you bring to them.
Pricing Strategy #4: FREE or Market Value Pricing
You may see people out there working for FREE! How can they do it? How can this business be viable?
There are people who give out tax advice for free, but when you investigate deeper, it leads to another way to make money.
Nothing is truly free, though. Let’s take social media for example. Anyone can have a free Twitter account. So how does Twitter make money? Through advertising!
Those people will often funnel their clients to them, and base their pricing off “market value pricing.” This is when they look around them at what the competition is charging, and they charge what the market will bear.
What are others charging? Charge the same.
One of the major problems of all the previous pricing models is that they don’t take into account all of the time that you spend on education.
In fact, the IRS released a report claiming that it would take an accounting or tax professional approximately 2,000 HOURS to learn all the new IRS tax law changes – THIS YEAR ALONE.
So that makes me ask – how do you get paid for that 2,000 hours? Or, how do you get paid for your education; or your master’s degree? Any continuing education? You wouldn’t dream of charging your clients for an hour of education – but someone has to pay for all of that.
This is where value-based pricing comes into the picture.
Pricing Strategy #5: Value-Based Pricing
Of all these pricing strategies for accountants, value based pricing is definitely my favorite.
Value-based pricing puts the ultimate need of the client first.
It’s not about hours or number of forms needed to accomplish the task. It’s about looking at the end goal of your client, no matter what it is.
Does your client want to:
- Save money?
- Improve their take-home pay?
- Increase their company profits?
- Save money on taxes?
Instead of getting lost in the day-to-day nitty-gritty tasks, this approach to pricing focuses on results. You get your client the results that they want, and then take a piece of the value.
It can be tricky, however, if you think about switching to a value proposition, and can’t think of the highest value that you bring your client.
That means that you need to sit down and figure about what the highest value is that you bring to your clients and focus on that. Look at what you’re good at and what you love doing, and then find ways to increase the value.
Once you do that, you will be able to niche and provide your customers with the best possible service.
See, at the end of the day, your clients don’t care about the nitty-gritty details.
It’s like a brain surgeon’s patient. When they wake from surgery, they don’t ask the doctor how many stitches they have. They don’t care about how many cuts were made, or how much gas the anesthesiologist used.
They want to know the results of the surgery! Did the surgeon accomplish his task?
And that’s what your clients want to know too!
Did you save them money on taxes? Did you help them increase their take-home pay? Did you help them increase their profits?
The results are what your clients pay for, and that is what the value-based pricing model is based on.
What If I Want to Change My Pricing Strategy?
But wait, Michelle, you may be asking. I’ve been in business for 10, 15, 20 – maybe even 40 years! It’s too late to change my pricing structure now!
My answer is NO, it isn’t too late!
If you want to change to one of the best pricing strategies for accountants we’ve mentioned here, you can! Focus on the benefits that you are bringing to your clients and show them the end result! Find what you are the BEST in and serve your clients.
You’ll find that when you focus on what makes you unique and special, and how you can bring the best value to your clients, you can use the pricing model of your choice, and have less stress, work fewer hours, and bring greater value to your clients.
This sounds like a win, doesn’t it?
What do you have of value to offer your clients? What do you LOVE to do, and what makes you special and sets you apart from all other accounting and tax professionals? When you look at these best pricing strategies for accountants, which one fits most with what value you have to offer?
What pricing model do you use in your accounting firm? Would you considered switching to one of these best pricing strategies for accountants, and if so, which one would you choose?
PS. Do You want to MAKE MORE MONEY, WORK FEWER HOURS?
Join me so you can unlock the secrets to growing a profitable accounting firm with less stress by joining our free Abundant Accountants Masterclass!
You will learn:
• The easiest ways to sift through clients and get to the RIGHT ones!
• Proven tactics to actually get paid instead of giving away FREE advice!
• How to stop competing on price FOREVER!