The great accounting pricing debate took place on Tuesday, 13 October 2020, and it was an eye-opener for the hundreds in attendance at the first virtual AccountEx event in SA.
Kicking things off was Mark Wickersham, author of The fastest way to change profits, and a long-time accounting practitioner, who explained how he dreaded bringing up price when first starting out with his own accounting practice in the 1990s. “The mistake I made in my practice was I dreaded the price conversation. I’d get asked what’s the price and I would panic, go away and send them a written proposal later. That didn’t work. The reason it doesn’t work is that when the client gets a written proposal with a price, they tend to make a snap judgment – without you being there to take them through the value proposal. I would always offer multiple options. If you offer a single price, most times it will miss the mark.”
Wickersham advises not to send out written proposals, but to present the price in the form of multiple options, and to do it face-to-face with the client so that the options and value proposal can be explained.
Martin Bissett, founder of the Upward Spiral Partnership, added that most clients have a maximum price in their mind that they are prepared to pay, and the challenge is to find that level.
“Pricing is behavioural – until we start believing in our own worth, we will continue to focus on the inputs rather than outputs, we’re the same as everyone else, but when we focus on outputs. You’ve got to win your first client, and that’s yourself.
“When you’re working towards outcomes, you’re working to something the client values. That has tangible and intangible benefits. You want to show a goal which the client feels is much more than the price they will be paying.”
Throw away the time sheets
Adriaan Basson, founder of Wingman Accounting,said it is time for accountants in practice to throw away the time sheets: “I used to be an auditor and I hated time sheets. I left corporate to do my own thing. Intuitively I knew that the service fee deliverable is rather intangible. You think of cell phones and their fixed fee model.”
It’s important, says Basson, to find alignment between yourself and the client: “In my initial discussions with clients, I’m curious to find out about their attitude towards tax compliance, and other issues such as how quickly they expect financials (we want it quick). We’re looking for alignment.”
And if that alignment cannot be found, maybe that client is not for you.
Customers are not buying hours, they’re buying outcomes and results, said Wickersham. “No-one cares how long you spend doing the work. You can never do value pricing unless you trash the time sheet. The single biggest problem with this is you keep your attention on time, not on the deliverables. We should be measuring how happy are customers and staff, rather than hours.”
4 questions to ask new clients
Wickersham says there are four broad questions he asks when first interviewing new clients:
- What got the client into business, and what are their goals?
- What are the problems? This is an opportunity to uncover as many problems as possible and identify the main challenges facing the business.
- Now is the chance to bring up the all-important “Consequence” questions: how do these problems manifest themselves? Eg. is bankruptcy imminent?
- Now come the even more important “Outcome” questions. This is where you get the client to outline what benefits they expect from the engagement.
Value pricing is difficult to master, adds Wickersham, and is something that is always being refined.
Value pricing finds its home in advisory, says Bissett. “So many accountants have said that ‘it’ is too expensive, not having defined what ‘it’ is. For example, one client of mine had tax manager for pricing, and a tax partner for closing. The tax manager inflated the price by 25% because he knew the partner would collapse in the closing situation.”
The answer is to have confidence in yourself and the value you add, and then you will have confidence in the price you are charging.
Be careful of a one-size-fits-all monthly retainer
Basson says many clients don’t understand what services are covered by retainer fees are, and then come with years of backlogged issues that are not covered by the retainer. “Don’t include everything in the retainer – charge separately,” he advises.
Bissett says a good approach is to offer the client three different prices with three different service options. “There is a possibility that the client might come back with something you have not offered. There’s only three prices: the cost price, the ideal price that we want, then there’s the walk-away price (the price below which you’re not prepared to do the job).”
When it comes to present clients with prices, it should be divisible by 12, with a discount available (10% for example) to help close the deal. That price should be comparable to what the client is already paying. “The client will look at what they are already paying and we can show how much value we can add for relatively small increase on top of that,” says Bissett.
“The market can always stand the price you can justify. The challenge is to justify what it is charging for, and there’s too much focus on the price itself.”
Don’t publish your prices on your website
Should you publish prices online?
“No, never,” says Wickersham. “You have to have a conversation and price accordingly. Sometimes the published prices are ridiculously low. Put a price too high and you won’t get a call back. The purpose of the website is to give a compelling reason to engage with us.
Bissett agreed: “I’m more on advisory side, so you don’t want to commoditise your services. Establish value with the client on a one-to-one basis.”
Says Basson: “Most of our new clients are referrals, so we’re not really being compared on price with other firms.”
You can learn more about value pricing at https://www.wickersham.co.uk/free-mentoring