What is something worth? Odd as it seems, whatever someone is willing to pay. That’s why airlines offer seating tiers, why some people would pay $31 million for a wristwatch, and why some business owners will gladly pay 12 times more for a new accountant if it means a higher level of service.
How does this relate to accountant pricing strategies?
Well, value is entirely in the eye of the beholder. And here at Gusto, we feel accountants could behold themselves even more highly. Many firms or individuals wait far too long to update their pricing. They charge too little, and fall into a time debt cycle that keeps them from making the change.
That’s why Caleb Newquist, Gusto Editor-at-Large, and Kenji Kuramoto, CEO of Acuity, have teamed up to deliver a master class in how to price accounting services. Join them on June 23, 2022 to get your questions answered.
And if you’d like a teaser, we’ve got three tips below.
3 Steps to Update Your Pricing
Step 1: Pick a service to update
The first question to ask yourself is, should you update an existing service or launch a new one? Both have unique challenges. If you’re updating something that already exists, clients will probably resist. But that resistance is not insurmountable — not by any means. In fact, it could be a good sign. It could indicate that you’ve identified several clients that aren’t a fit for your firm.
The founders of the firms hiline, Launch Consulting, Inc., and Blumer CPAs all ran into this problem. Each of them reached a point where their vision for where their firm was headed no longer matched their existing client base. All three presented their clients with an option: Either migrate or we can help you find a new accountant. None of these firm owners regretted it.
Whereas if you’re launching a new product line, like Kenji did with Acuity, you may face less resistance, but you’ll also be dealing with lots of unknowns. Do clients actually want the service? What packages should you offer? What’s necessary to actually land that first client?
If you want ideas for new services, look for places you and your team are already doing things for free. For example:
- Free advice
- Unpaid compliance strategy
- Unpaid research
- Tech consulting
Or, you might look at places where you’re delivering a tremendous amount of value, but only billing by the hour. For example, Paul Glantz tells a story about a client that had purchased a $300,000 piece of equipment which their former accountant said they couldn’t depreciate. In one hour of research, he confirmed they in fact could, and reduced their tax bill by $105,000.
In those instances, surely, there’s a way to capture more — and the client would be happy to pay.
Step 2: Pick a new price
Whatever price you pick, try not to set it based on an hourly rate plus some percentage. While this would make things easy, it’s undercutting yourself.
Highly profitable firms tend to charge for the value they deliver, not the hours they spend. They don’t want you to spend 20 hours auditing them — they want the decision. When you realize that, you start to see all the ways software, packaging, and a stronger accountant pricing strategy can free your firm from the billable hour.
Instead, think of ways to charge:
- Fixed fees
Step 3: Craft a communication plan
When you present your new pricing to clients, explain it in terms of what they stand to gain in the future. Do not, under any circumstances, position it as, “We’ve been doing a lot of extra stuff for you and so now we’re catching up.” That’s not how the client will see it, and this is a cognitive bias we all share. No matter how long you got that free HBO subscription from your sister-in-law, you still don’t want to pay $14.99 a month for it. Similarly, no client wants to be reminded they are indebted for things they never noticed. They’ll be much more interested to know what they stand to gain in the months and years to come.
To craft your communications plan:
- Determine your ideal buyer
- Write messaging for how to talk about it
- Decide everyone’s role
- Craft legal language
- Prepare a proposal template
- Set a launch timeline
- Update the website and collateral
- Make a marketing plan
And when you’ve built all of that, you’re ready to launch your updated pricing, and capture more of the value you deliver. Which in turn, will free you or your firm to do even better work.
Curious how this works in practice? Want more accountant pricing strategies? Tune in to Caleb and Kenji’s webinar on June 23, 2022 and hear how Kenji has done this with his own firm.