How to price accounting services (The approach that may make you feel slightly nervous)

How should you price your services?

THIS is the million-dollar question.

What is the point in making sales if they don’t make you any money?

Being profitable is at the core of everything you do, and I rarely meet an accounting business who has this totally locked down… even the big ones.

In our firm, I believe we have this nailed.

It has taken years of refining, but we have a very clear and sophisticated pricing methodology that ensures we don’t leave any money on the table, we charge for everything and we don’t permit scope creep.

We base our pricing on a range of logical factors such as their annual revenue, number of transactions, the quality of their record keeping, turnaround times, levels of support and frequency of delivery. 

But the trick is then to present that complexity as simply, clearly and transparently as possible to your team and your clients.

This approach has allowed us to raise our average monthly fee to £800 at the time of writing this book and is helping to sign new clients of between £1000 - £3000 a month.

The other reason why you MUST be profitable in the way that you price, is that you have to be a profitable firm. If you’re not, what chance do you have of helping your clients to be profitable too, which is why they’re coming to you in the first place.

This will give you the firm foundations on which to start building your own pricing methodology.

There are many ways to determine your fees, but these are the main two used by a large number of struggling firms out there…

• What are other firms charging? Let’s find that out, then charge either slightly more or slightly less than them, depending on what feels comfortable.
• What do we think clients will pay, so that sales conversations aren’t going to be that uncomfortable?

Both of those are fear-based questions, designed to keep them within their 'comfort zone.’

But do you know what’s crazy? The firms using this approach just aren’t comfortable. They’re in serious pain.

People confuse ‘comfort-zones’ with ‘familiar-zones.’ Just because you’re familiar with doing things a certain way, doesn’t mean they make you comfortable.

If you want better results for yourself and your business, you have to make better decisions. Decision making is the only power that moves a business forward.

The quality of your decisions comes down to the quality of your questions. If you want to make better decisions, ask better questions.

So, what about asking questions like…

• How much money would we ideally like to make from this service or per client?
• What fee would allow us to do our very best work?
• What would we have to charge in order to deliver the level of value that our clients would be happy to pay for?
• What would we have to charge in order to be able to attract the best staff so that we know all work will be delivered to the highest standards?
• If you’re the owner of the firm, you could ask – “How much money do I want to make personally, to have the life that I want?” Then… “What would we have to charge to enable the business to pay me that amount?”

This approach may make you feel slightly nervous because then you’ll have to justify that fee and develop the skills to attract the clients who are willing to pay it.

When Dyson vacuum cleaners first launched, they were twice the price of their competitors and critics thought no-one would ever pay that. But their product was significantly better, and they did a great job of communicating that value.

When the iPhone first came onto the market, it was again, twice the price of competitors phones, and again critics said they were overpriced. The value of the product, and Apple’s ability to communicate that, had people queuing around the block. They sold out.

If you have an incredible service that delivers great outcomes, and you can communicate the value of the service and give certainty, then you can charge significantly higher fees than anyone else is charging, and perhaps higher than even you thought was possible.

Is it hard to charge high fees? Yes.

Is it hard to charge low fees? Yes.

Choose your hard.

Set the fees you want to charge in order to generate the profit you want to make, not to be in line with what others are charging.

Set fees that will help you to deliver the level of service your clients will be happy to pay for.

Factor in everything that can go wrong and be mindful of the risks you’re exposing yourself to with certain services. Build in contingency.

If it takes you, on average, five phone calls and ten emails to get a client to give you the information you need to complete their tax return, factor that into the price.

If one in fifty payrolls always need amending, factor that in.

Now while you don’t want to be taking the prices that other firms are charging, you can use their methodologies; there’s no point in reinventing the wheel if you can take what has been proven, pressure tested, and evolving in other firms for years.

Modeling other people’s success is one of the fastest ways to make breakthroughs.

Be bold and if it turns out to be wrong, change it.