This week I discuss value pricing for accountants with Kirk Bowman from The Art of Value. We are going to dive into effective pricing for accountants and discuss strategies you can implement in your firm right now.
I met Kirk at a Boston Conference late last year and was impressed by his down to earth approach to sharing knowledge on value pricing.
I wanted to introduce him to my readers because Kirk has interviewed hundreds of business owners about value pricing, and has built a resource of thousands of different practical applications.
Kirk and I share several fundamental beliefs about effective pricing for accountants. Although his interest is more general, it reflects how I work towards a clarity of offer and in implementing the proven strategies that make accounting firms more effective and profitable.
You can listen here, or read the summary below.
Your Standard Offer and Value Pricing
- What is the most important thing you can share about pricing for accountants?
- Pricing can be scary for accountants.
- However, processes and systems can create a repeatable result.
- Define a standard way to a price for your core offering.
- Price other services based on the value to the customer.
- The advisory services are often already part of your core offerings.
- Compliance is not just financial statements and tax returns, but can include daily interaction with your customers.
- You can value price the core offering also, but that is more about prestige.
- The majority of accountants make money by volume rather than creating more value for existing customers.
- What is the biggest challenge to switch to value pricing?
- Mindset is the biggest challenge.
- It is scary to move away from the traditional way of doing things.
- Firms are currently making a decent profit.
- It is a leap of faith.
- By creating a structure for value pricing, it makes it an easier transition.It helps accountants move past the conventional mindset.
- Billing on time is a safety net.
Core Work vs Advisory Work
- Have accounting firms started to value price the “core” work?
- Once they are comfortable with pricing the advisory work, firms then start to value price the core also.
- Once an accounting firm defines its core offering, it and take a fresh look at who their customer is.
- The customer who just wants compliance work will no longer be a customer.
- The firm removes the core work (compliance only) and focuses more on value-add services.
- At this point, they naturally become true value pricing firms.
- The stages of transitioning help firms who want to move toward to value pricing without a 180-degree commitment.
- Following the process, you can reduce the transition time by half.
- What types of services are core and advisory?
- A regionally focused, traditional firm, whose average fee is very low, looked at their core offerings.
- They created three offers:
- The base offer is a compliance only offer.
- The next step up is compliance plus – more offerings, but no business advisory.
- The top package is the business advisory, where the firm will do whatever is needed when the customer calls.
- When they provided three options, they increased the number who were willing to pay for the business advisory.
- They got more requests for cash flows and budgets to refinance, so they created a bank monitoring service, providing monitoring on a quarterly basis.
- The firm saw a 50% increase from the monitoring service.
- The average price per customer rose 25 % after the first year.
- Another boutique firm, created a base offer including forecasting, tax planning, financial statements, tax return, and contact us anytime.
- The owner began to be perceived more as a strategist and his customers only called him to talk about their businesses, rather than day-to-day tax planning.
- He increased his revenue by 36% and his profitability by 23%.
How to Innovate in Accounting
- How can an accounting firm innovate?
- If you are just starting in your accounting process, do not do what everyone else is doing.
- Innovation is saying what value you can add to your customers beyond compliance.
- Once you know what your other skill sets are, you can find additional ways to create value.
- For an existing firm, identify your core products and structure them in a way to articulate to the unique value proposition to your customers.
- The partners can move away from compliance and have more time to think about value.
- Innovation is approaching something in a non-traditional way.
- Accountants often do not understand the value that they create or how to articulate it to their customers.
- How can an accounting firm develop an innovative mindset
- There are two types of business people: the person who can find his own way or the person who knows he needs coaching.
- The CEO of Google has a coach who questions him about his mindset.
- Find someone to question your mindset to help you innovate.
- Asking great questions is a core skill, and it is hardest to ask them of yourself.
- Getting more work from existing customers is often easier than getting new customers.
- Use the knowledge and experience you have and determine how to create value for your customers using those skills.
- Third-party perspective can bring clarity to a situation; however an industry expert can provide a different perspective.
- A mastermind group that includes people from a wide variety of industries can provide outside perspective.
- One small adjustment in your mindset can allow you to see the world in a different way and create extraordinary results.
- What is one of your best stories about creating value for a customer?
- A small town customer had a small electrician business.
- He was a compliance-only customer.
- The customer wanted a holiday so that he could think.
- Andrew made him $30K by asking him when he was scheduling his holiday.
- That one question added a massive amount of value.
Your Standard Offer and Value Pricing
“Once you price the core offer then all the rest of the pricing will be based on Value.”
Core Work vs. Advisory Work
“If you can identify your core value add service offerings or your “products”, structure them in a repeatable process, your team will start to take over that process and that leave you open to have time to think about the value you can offer to your clients.”
How to Innovate in Accounting
There are 2 types of people in business: (1) A person in business that find own way and (2) A person in business that knows he needs to be questioned in order to find other ways.
- Accountants Pricing can (and should be systemised)
- Start with packaging core offer and productise value add offerings, it makes it easy for the team to deliver and more importantly clients to understand value of service
- Get an expert to question the business and how you lead it
Value pricing for Accountants is essential in transitioning firms and practices from compliance to higher value advisory work.
It’s one of the main components of my Chairman’s Program. I’ll talk more about the program next week.