How to Price Accounting Services in 2022
The value of accounting, bookkeeping, or tax services changes drastically over time, so you should re-examine and adjust your pricing model often. Make sure that your clients get exactly what they need, but also recognize the value you bring to your business relationship. If you’re having a hard time adapting to your market’s ever-changing demands take a look at our guide to price accounting services in 2022.
Sometimes, phrasing is everything. One of the reasons why your accounting services aren’t being valued the way they should be, is the language that you use when you discuss your prices. When talking about pricing your accounting services, don’t ever use the F-word– “fees.”
No one wants to pay fees. Fees are an additional sum for a non-essential. Your services are essential. Don’t accidently downgrade them by associating them with fees. Instead, use a term with more postive associations like, “investment” or “value.”
The language you use matters. You have to be careful with your word choice when speaking to both your prospective and current clients. Keep in mind that perception can become a person’s reality. And, while you and the services you offer are indeed incredibly valuable, continuing to use the F-word “fees” is still potent enough to decrease both your profitability and worth.
In the Create Your Dream Firm program, we’ve instituted strict measures to ensure that our members never say the F-word. A “swear” jar. Everytime they say the F-word, they pay the jar. This fosters a sense of accountability and helps our clients outgrow this bad habit. After all, it’s better to lose some spare change than lose your entire business, so use language that properly reflects your value.
One of the most important lessons to learn about how to price accounting services is NEVER post your prices online. The numbers associated with your services are meant to be variable because the complexity of work changes as a businesses grow and demand increases. You can, however, set floor prices or minimum rates, so as not to surprise prospective clients.
However, there are some cases where you don’t want to set fixed floor prices. Let’s suppose you chose a floor price of $2,500 monthly for basic accounting services. For small businesses, that may already be at least 10% of their current total revenue. And, because of that intimidating number, you could drive away potential dream clients who are still in their startup phase.
A value ladder is an essential tool that allows you to grow with your dream clients, and it makes pricing accounting services much easier. Our very own Dream Firms’ value ladder has three main parts: basic compliance (BC), max compliance (MC), and advisory services (AD). This clearly defines tiered-price thresholds that can accommodate different types of our dream clients.
With this simple approach, you can easily establish model for how clients can access a certain set of your services. Take the time to list all that’s included in each tier of your value ladder. Defining everything, down to the minutia. To help you out, here’s how to use the value ladder in pricing your accounting services.
To properly use the value ladder to price your accounting services, we suggest using a top to bottom approach. Start from the most expensive option, advisory services (AD), and work your way to the most basic tier, compliance (BC). This flexible method works universally, whether you’re defining the services included in a set, or categorizing your clients based on their revenue, making it ideal for setting a pricing structure.
NOTE: You may freely tweak the range of percentage values you set for each price threshold.
Advisory services (AD) is the highest tier of the value ladder. Clients in this group should be eligible for the full scope of your accounting, bookkeeping, and tax compliance services plus access to your timely and highly valuable expertise. Its price threshold should be at least 5% of your client’s revenue.
Let’s say you have a million-dollar company as your client, in your target niche of choice. Most of the time, the advisory services (AD) package is the best fit for them. To get a good quote for that client, you calculate 5% of their annual revenue and divide that by 12. So, the floor monthly ballpark would be around $4,200.
Your potential clients’ response to your prices will also allow you to determine if it’s worth it to continue the conversation. It provides you the opportunity to evaluate whether or not they understand and recognize your true value. If everything checks out, you can turn your attention to presenting your services and calculating your clients ROI, instead of wasting time trying to get them to see your value.
Clients who require the accounting, bookkeeping, and tax compliance services you provide, but not the advisory services, can be placed in the Max Compliance (MC) tier. It’s for those clients who are not yet ready for your guidance on their specific problems. A great price threshold for this is around 2 to 3.5%.
But, keep in mind that if you build trust with this client as they grow, you can move them up the value ladder when your advisory services are needed. As you move down the path, closer to your dream firm, the majority of your clients should be in this tier. If you have the right systems in place, this is the perfect opportunity to earn more without spending your valuable time to do so.
The basic compliance (BC) tier is your firm’s introductory package for clients who only need quarterly touchpoints or year-end tax returns. This is for clients that just need you to keep a finger on the pulse of their businesses. The floor price threshold for this should be around 1 to 1.5% of their revenue.
A value ladder is so valuable because it allows you to grow with your clients. Don’t immediately turn away clients who can only take advantage of your basic compliance (BC) package. Instead, monitor their growth and maintain a good relationship with them. Then, as they grow and new opportunities present themselves, you can graduate them to your MC and Ad tiers.
The best method for how to price accounting services is to be flexible. That’s not to say, undervalue your services and cut costs for your clients. But rather, to provide whatever service they can afford to the best of your ability. When you do this, you give yourself the future opportunity to transition them to a higher tier on your value ladder, once they’re ready. But for now, meet them where they are.
To maximize your profitability and optimize the work hours you have to put in, it’s best to accommodate businesses of many different sizes. Learn how to set up automated processes & systems in your accounting firm, that allow you to seamlessly accommodate basic compliance (BC) and max compliance (MC) clients without much of your effort and work hours spent.
How to price accounting services shouldn’t be the only thing on your mind. You should also have a plan for how to advance current and potential clients through your value ladder. Clients who have significantly increased their annual revenue would benefit from your more valuable service packages. Establish a plan to communicate how moving up the value ladder adds value to their business and saves them money.
Naturally, businesses that have experienced explosive growth will be more demanding in terms of the volume and complexity of the accounting services they need. Time is your most important resource. So if you have to spend more of it on one client than another, it is more than fair to ask clients to invest more on their end as well.
Generating higher profits isn’t exclusively driven by how you price accounting services. Taking advantage of affiliates and strategic referrals allows you to generate passive income without directly delivering a service. It’s a way to earn a share of another business’s income from their client’s investment just by facilitating a relationship between them without much of your time.
Affiliate and referral programs are especially great if you have a vast network of clients. People are much more likely to use a service that was personally recommended by someone they know and trust. Aside from the direct incentives that you can get when you successfully bridge a client, prospective clients can also discover you and your services.
If you want to read more on how you should quantify the value of your accounting services, check out our article on pricing increase on accounting services during tax season.
How to price your accounting services is simple when you adopt the value ladder approach. Remember to meet clients where they currently are, convince growing clients ascend to the next tier, and take advantage of the passive benefits that you can get from affiliates and strategic referrals.
For additional guidance on how to price your accounting services, insight into how you can maximize your time to grow your firm, and step-by-step marketing instruction, reach out.
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