Pricing accountancy services is notoriously hard. Too high and you’ll scare away your clients. Too low and you end up working for a pittance. What’s the right way to price?
Cost plus pricing, value pricing, psychological pricing, penetration pricing; there are dozens of theories around pricing. How do you know what’s right for your particular circumstances?
In our experience at AVN, pricing is the issue where accountants have the least confidence and the least understanding of how to get right. And very often, that leads them to under-price rather than overprice their services.
AVN’s managing director, Shane Lukas, recounts an interesting conversation he had with an accountant in Dublin.
“He’d been speaking to a client who was complaining about turnaround times and things that hadn’t been done. Eventually, out of frustration, he told the client, “To do all of that in the timeframe you wanted would have cost €20,000.” The client’s reply was a real wake-up call. He simply said: “I’ve never refused to pay what you ask. Why didn’t you tell me that’s what it would have cost to get what I want?”
“The client’s actual bill was €6,500. The accountant realised he’d been guilty of making assumptions in his own mind about how much the client would be prepared to pay. The result was an unhappy client. Thankfully, because the client complained rather than just walking away, the accountant was able to raise his fee significantly and keep everyone happy.”
Setting the right price
This kind of thinking is extremely common. We regularly speak to accountants who are working long hours for very little financial reward and who are feeling stressed and unhappy. They want things to change but when we suggest raising their prices their first reaction is usually negative. “Oh, I can’t do that. My target market won’t accept it,” or “I have to charge low fees because other accountants will undercut me and steal my clients.”
But if you simply base your fees on what your competitors charge, how do you know that they didn’t undercut their competitors? Who in turn had undercut theirs? Undercutting each other is a vicious downward spiral of reducing profitability in which no one – neither you nor your clients – wins. You’re working more and more hours just to pay the bills but spending less time on the higher value work that really benefits your clients.
And, like the accountant in Dublin, have you even tested a higher price on your clients to see if they’ll accept it?
There are numerous strategies that will help you set your fees at a level that’s both profitable for you and acceptable to your clients. These three are among the most effective.
Communicate your value
Do your clients understand what you actually do? Probably not, and they don’t need to know every detail. But they do want to know what value you bring to their business.
When you’re pricing accountancy services, highlight the benefits to your client. It could be reduced tax, increased profitability, better cashflow or anything else. Explaining this helps them to understand your value. And when they understand this, they’re much more likely to accept paying a higher fee.
Package your services and give clients a choice
Bundling a range of services together makes it easy for clients to choose you. When they have a choice of packages, they’re more likely to pick one of them than if there’s only one option and one price available. So as well as selling at a higher price, you also sell more.
Create service packages with tiered pricing and label them e.g. Platinum, Gold, Silver (or something more creative). This gives your client a clear indication of the value they’re getting.
Use pricing software
Shane Lukas explains: “If you aren’t confident about your pricing, it can sound like you’re plucking figures from thin air and that gives the client the opportunity to challenge you. But when the software shows the price, it’s fixed; that’s how much it costs. Using software (such as AVN’s Time’s Up) also lets the client decide which services they want in their package, with the price automatically going up or down accordingly, of course.”
“I spoke to one of our members recently and by creating packages and using Time’s Up she’d increased the fee for one of her clients by 103% – with the client happy to pay it.”
In fact, when we’re working with an accountant, we teach seven methods (including those above) to increase prices in a way that demonstrates they’re delivering greater value.
If you’re unsure about pricing your accountancy services, book a call with one of the AVN Practice Growth Experts. We’ll talk through your issues and help you develop a strategy that works for you and your clients – book a discovery call here.