The accounting profession is changing rapidly as technology and innovation allow CPAs to provide more services. In a recent survey, 79% of accountants said clients expect their firms to offer consulting services. As a result, CPA firms are beginning to offer more services than ever before, including data analytics, financial consulting and advisory services.
As this dramatic shift takes place, it is natural that clients and CPAs alike are looking to change the way these services are billed. In the same survey, 86% of accountants said clients are increasingly demanding greater flexibility within their budget to access the services of most importance to their business.
A value pricing model has entered the equation as a better way for CPAs to bill clients for their offerings. While charging an hourly rate has been a tried-and-true method for decades, it can’t keep up as the profession evolves. Switching to a value pricing model will not only benefit your business with more revenue, but it will keep your clients happy as they know exactly what they are paying for what they need. Not only that, but CPAs will be happier as their hard work will have more value to their clients. As you get started with value pricing, here’s what you should know.
Why Value Pricing?
Your efficiency should work in your favor. Charging an hourly rate works well for you when you have a lot of forms and data to pore over. However, being the highly efficient and productive CPA you are, you get better as you go along and get the job done faster. While being efficient makes the client happy and frees up time for you to move on to other work, it also means you are getting paid less for your expertise.
Value pricing allows you to set a price for your services that works for everyone. In the beginning, when it may take a little more time and effort to complete the work, the client is happy because they are not paying you more money to get started. As time goes on, your hard work will pay off for you AND the client as your fees will not decrease and the client still sees the benefit of your expertise. Switching to value pricing will also allow your firm to manage income and expenses better and decide which services will bring the most financial and personal value to its CPAs.
Gather the Data
Put your data analysis background to good use as you work on your pricing model. Study the historical costs you have incurred over the years to find a good middle ground. Make sure the prices you put on your services are high enough to be sustainable for your business but low enough that your clients won’t be priced out.
This may seem like common sense, but finding the right price is crucial to your success. Prices that are too high will turn your clients away. Too low, and they won’t value the product you are giving them. While you are at it, changing your pricing is a good time to analyze which services have had the most worth to your clients. Cut back on the products that have little benefit and capitalize on what is most important and profitable.
Changing the way you bill your clients can be tricky if you don’t do it right. Clients can feel like you are trying a bait and switch on them that will translate to higher costs and less control for them.
Don’t dive right in the deep end, throwing new prices at your loyal customers. Instead, dip your toes in at first with value pricing for new clients. Introduce the idea to your existing clients and allow them to choose whether they prefer value pricing or billable hours to start. Let them know they still have control over their budget, and they will begin to see the merits of the new pricing model.
Give Clients Control
A big benefit of value pricing is that both the CPA and their clients can have more control over costs and profits. Under an hourly billing model, if a CPA takes a bit more time on a project, they may end up charging a client more than expected or giving a discount to avoid a high bill. This scenario doesn’t work for anyone. Either the CPA or the client will feel they lost some control over the end result.
Value pricing helps keep the costs up front for everyone, and clients can control how much they want to spend. Give them a bit more flexibility with their budget with different pricing options. With tiered pricing levels, clients from small startups to large businesses will have something they can afford.
Communicate with Clients
Value pricing can feel like a big change, and good communication can help the transition go smoothly for everyone. Talk with them one on one about your offerings, what they need, and how much it will cost. Communicating up front about the changes and the costs they can expect can help avoid losing clients as they understand how this move will benefit them.
You’ve invested time, money and brainpower on transforming your accounting business to give your clients the best services. Value pricing is the next step in your company’s evolution that will boost your profits and your clients’ satisfaction.
Justin Hatch is the co-founder and CEO of Reach Reporting, a visual reporting software company. Hatch is an industry expert in business management, specializing in software development and financial reporting.