As one of the most important factors in a business’ success, pricing can be one of the most perplexing things for accounting firms to get right. Pricing your services effectively can mean the difference between scraping by and robust growth.
If you lack understanding in how to set prices that work for your firm, you may need to look deeper into pricing psychology and how other small, yet successful businesses make their products and services more attractive to customers who are more than willing to pay for them.
Value is what sets an accounting firm apart from the competition and that perceived value influences how much clients are willing to pay. The higher the value, the higher you can set your accounting firm’s prices. To clients seeking accounting services, they may place value in an accountant’s years of experience, the portfolio of clients, industry awards, and level of education. The quality and experience your accounting firm offers establish the value of your service, which will help you to set the right prices.
When it comes to setting prices, you can’t rely on just one variable. Look at numerous different angles, from your competition’s prices to the value of your unique services, to discover your firm’s worth. To attract paying clients, you need to find that zone where clients are willing to pay for your services, so you can generate a strong customer base while maximizing your profit. Ultimately, you need a good business strategy that delivers value to clients, so you can support your pricing strategy.
So why do so many accounting firms struggle to set appropriate prices? Some firms follow a more antiquated pricing structure, such as a time-based billing strategy. The time-based billing approach is often the default approach to pricing strategies for accounting firms. This long-standing traditional way of billing clients requires firms to track every hour spent on a project. Then, the accountant presents a list of services performed, along with the hourly rate.
Today’s clients want more price certainty when it comes to engaging with businesses and they don’t want to have any surprises down the road. They are far more comfortable with price certainty, especially when they believe they are spending their money on something valuable to them. Don’t make the mistake of believing that clients are only driven by price and will flock to the most affordable option.
This is a short-sighted approach to winning business because it devalues your firm’s brand.
Another pricing strategy that is common, but not always the best choice, is a cost-plus approach. Essentially, this is adding up the cost of what it takes for a firm to provide the service, then adding on a percentage for profit. This method is often considered too inflexible because it doesn’t take into consideration what the client might be willing to pay for the service, how the pricing compares to the competition, plus additional marketplace demands.
There are plenty of ways that accounting firms can proceed when looking at pricing alternatives. It begins by examining each service provided and determining its value to the target market, maximizing the profit margin, and remaining competitive. The benefits of a thoughtful pricing strategy include organic growth, stability, and profitability.
One popular pricing strategy, the fixed fee approach, can work well for accounting firms to price basic or repetitive services, such as preparing simple tax returns. The fixed fee pricing is set, no matter how much time or resources are devoted to the project. Clients like to know what they will pay up front and are more focused on the results of the project and how it helps them out. It also makes it easy for clients to compare services between different firms and measure the value of services against each other.
The most successful pricing strategy that is emerging for today’s small businesses or firms is value-added pricing. This approach means setting prices by focusing on the value of your goods and services. If you constantly ask yourself what your accounting firm can do to provide even better solutions for your clients and adjust your services accordingly, you’ll quickly find ways to increase your firm’s value to justify your rates.
Because no two clients find the exact same value in accounting services, many firms offer a menu or package pricing. This allows clients to choose the level of service they want, identifying what value they see in the offering. Pricing psychology reveals that clients certainly want choice because they all have individual wants and needs. A hierarchy of packages plus customized add-ons gives clients the information they need to understand how you can best help them.
It’s easy to see how pricing ties in so closely with other aspects of operating a successful firm. For example, marketing to prospective clients must effectively communicate your firm’s ability to relieve their pain points and showcase how you will save them time and money. When your target market understands the incredible value related to your firm, they will pay for that assurance.
The success of your accounting firm depends so much on implementing a pricing strategy that boosts profitability while sustaining longevity without damaging your brand. Instead of sticking with a safe but short-range pricing strategy, develop purposeful prices that will lead to more success.
Want to learn more about pricing strategies for your accounting firm? Read How to Price Your Accounting Services: One Simple Strategy to Make More Money.