For many bookkeepers, pricing comes in one common form: hourly. In some cases, this can be effective, especially for large clients with significant hourly requirements. But what about those that do not require the hours worth your commitment? What about small jobs that generate significant returns for your clients but small returns for you?
When you feel as though the only way to increase your revenue is to stop sleeping in lieu of working, value pricing may be the right solution. Allowing you to customize your pricing to each client, value pricing can give you the growth you desire, expanding your business and creating additional income potential without significantly scaling your operations.
What Is Value Pricing?
Unlike hourly pricing, which charges clients at a flat hourly rate, value pricing charges clients based on the perceived value you can offer them. This value may differ between client and company; for example, you may believe you can offer extreme value in refining your clients’ accounting operations, while your client may simply want to make it through another audit season without significant complications.
“We need to kill the billable hour in this profession once and for all. It is seriously hampering our ability to get paid what we are worth,” says pricing expert and CPA Ron Baker
. By learning how to balance your expectations with what you can offer your client, you will be better able to devise a mutually beneficial pricing structure that can pay off in the long run.
Implementing Value Pricing
The process of implementing value based pricing goes a little deeper than simply ball-parking a number and giving it to a client. Instead, your pricing model should be based on empirical evaluation, targeted observation, and a carefully balance between the value your client needs and what you have to offer. These five steps can help you implement value pricing in a productive way in your bookkeeping practice.
Evaluate Client Needs and Expectations
Prior to attempting to implement value pricing, you need to understand why and how you add value. First, evaluate what your clients are seeking. Do they need continuous bookkeeping services for their entire operation, or do they rely on you for expert consultations when needed? Are they looking to expand or grow in time, or are they happy to maintain the status quo? Once you determine what you can bring to the table in relation to what your clients need, you will be much better suited to put a price on what you can offer.
Establish Levels or Options
While pricing can be flexible for each client, establishing levels or options to provide to your clients prior to entering into agreements can be extremely valuable. Offering one flat price can drive away clients rather than attracting them; instead, providing tiers of service can allow for additional personalization, giving you a peek into what kind of support your clients are seeking in order to assign a fair price to what you can offer.
Create a Value for Each Independent Client
The beauty in value-based pricing lies in the ability to devise a target price for each individual client. Rather than being forthcoming with a flat rate, you can use the information you have determined about your prospective clients to put the proper valuation in price. For example, if your client would incur a steep cost in implementing your services in-house and yet wants comprehensive support, you can request a higher price than a client simply seeking audit assistance once or twice a year. Carefully interpret the answers and impressions provided, and price your value accordingly.
Present Your Options to Your Clients
After you determine the worth of your services in relation to what your client would like to accomplish, it’s time to present your options to your clients. Be sure to have an idea of what you are willing to accept as a minimum, and what target you are hoping to accomplish. Stand firm on your pricing relative to what you are hoping to offer, but be prepared to negotiate services and opportunities as needed. Your proposals will need to find a balance between the value you need and the options your customers want.
Once you have a contract in place and an agreement with your client, it’s time to establish the workflow. Your assignments, staffing, and support systems should be customized to the value you are offering and the payments you are receiving. For example, if you have a client who needs occasional support for minor ongoing issues, this kind of task is best suited for a lower level employee. Alternately, if your client has extremely technical and challenging requirements with a high price point, these responsibilities may be best suited to your senior employees.
When you’re feeling as though there’s no way to grow revenue without transitioning away from so-called selling time, value pricing may be the solution your firm needs to take strides forward. By creating a pricing plan that functions by maximizing the value your clients are willing to pay, you can move away from an hourly pricing model, creating a better overall experience for both you and those you work with. Value pricing may not be the right choice for every firm, but for those seeking organic growth, higher revenues, and additional clients, it may be the best way to get ahead.
30 Minute Webinar — Learn how LedgerDocs can streamline your accounting today.