These days, more accounting firms are shifting to value-based pricing or billing a client for services based on the service’s quality instead of hours spent working.
Value-based pricing considers the potential sales or savings of a given company. For example, suppose an accountant gets on a 20-minute consultation with a client over the phone.
During the call, he provides them with clear, actionable statements. Perhaps he taught them how to optimize their accounting system, or advised them on taxes.
Whatever the case, suppose that his advice leads to the client saving $40,000 in expenses. This service is worth more than 1⁄3 of a professional’s hourly rate.
Value-based pricing benefits independent contractors because they can customize their billing to fit the clients’ needs. It is the reason why many accounting and bookkeeping firms adopt this pricing model—you stand to earn more when you do not charge by the hour. However, it comes with particular challenges, like knowing how to scope for correct prices.
Convincing people to pay based on value requires a combination of communication and technical skills. You have to do two things—first, you must persuade your client to pay you what you think you deserve. Second, you must justify the cost.
When negotiating based on value, you often have to make concessions. It means several rounds of back-and-forth with the client, which could cause frustration and take up time. One benefit to this, though, is you get to understand your client’s needs better.
Agreeing on a price based on perceived value can also be detrimental to your productivity. Do not win them over with a figure that you think would appeal to them—factor in the cost in terms of time spent on the project.
Do you have to learn your client’s accounting systems? To perform the work they want, you must understand their workflow, which takes time. If you see yourself working long-term for this client, it should not be a problem for you to quote a higher rate than your initial assessment.
If you succeed in adapting to their system and delivering value, it is a win-win for you and your client. However, you can only do this if you truly understand what they want and how they want it delivered.
Furthermore, consider whether you are leveraging your resources properly. Your team might not excel when taking on a highly customized project, which leaves you to work harder and put in more hours for little benefit.
Creating client solutions does not have to be from scratch every time. You can set templates for repetitive processes and delegate these to your team. You might also want to find a niche for your services and provide solutions to those businesses rather than customize for clients from different industries.
Knowing how much your talents are worth is crucial in growing a business. If your accounting firm is still indiscriminately charging by the hour, it is time to look closely at your clients and see whom you can offer bespoke solutions.
Make your workflow more efficient with Firm360. Our invoicing & payments software allows you to customize your billing for your clients and manage other aspects of running an accounting business. Get in touch with us today for more information.