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The Thorn In Your Side- How to Price Accounting Services

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Pricing accounting services poses challenges for accounting firm owners. You’re stuck in a perpetual balancing act, trying to find that sweet spot between profitability and competitiveness. Prices must be attractive to clients in a competitive market while ensuring profitability. Setting prices too high may scare away potential clients while setting prices too low undermines profitability and service quality.
There’s also the issue of the complexity of accounting services… Your vary in complexity, scope, and expertise required. Accurately assessing work, time commitment, and required resources to determine a fair price is challenging, given diverse client needs. Accounting firms serve a diverse client base with varying needs. Pricing for different clients is complex. And, developing flexible pricing models that accommodate variations while maintaining consistency is a challenge.
The ever-changing regulatory environment adds yet another facet to the challenges of pricing accounting services. Staying updated on regulations, tax laws, and compliance is essential. It requires investing time and resources, impacting pricing structures, and making it that much harder to price accounting services. Here’s our quick guide on how to price accounting services and find the balance between profitability and client expectations. Starting off with the 3 Rules to To Pricing Accounting Services. 

Rule #1 - NEVER Use The F Word!

Sometimes, phrasing is everything. One of the reasons why your accounting services aren’t being valued the way they should be, is likely the language that you use when you discuss pricing. 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 accidentally downgrade them by associating them with fees. Instead, use a term with more positive 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.

Rule #2- Don't Publish Your Prices Online

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. For this reason, we suggest that you simply don’t post your prices online. 

Rule #3- Get Rid of Hourly Pricing

Hourly pricing is the bane of the accounting world. And, we highly suggest that you adopt literally any other pricing structure. Why? because hourly pricing accounting services penalizes you for being better at your job. The more experience and skills you amass, the faster you’ll work. Filing a tax return or reviewing P&L’s should take less time than it did one year ago, five years ago, even ten years ago (especially if you’re utilizing the right automation). If you follow an hourly pricing model, as your experience grows, your profits will decline. You’re hurting your profits by being efficient. You deserve to be paid for your expertise, and hourly pricing is NOT the way to do that. 

Dream Firms Note: The only time we condone hourly pricing is for a one-time project with a finite end, like a clean up!

Methods For Pricing Accounting Services

We’ve told you how NOT to price your accounting services. Now let’s talk about how to price accounting services and the most common approaches. Pricing accounting services can vary depending on several factors, including the scope of services provided, the complexity of the work involved, the experience and expertise of the accountant or accounting firm, and the specific needs of the client. Here’s a quick overview of the most common methods for pricing accounting services:

Fixed Pricing Accounting Services

Ah, fixed pricing. The ultimate solution for those who believe in the one-size-fits-all approach. Simply create a service menu, slap a fixed price on it, and voila! Every client, regardless of their unique circumstances, will be charged the same fee for a particular service. Who cares if Client A has a more complex tax situation than Client B? They’ll both be billed the same for year-end tax return preparation anyway.
If you can’t tell we don’t necessarily recommend fixed pricing. Although it makes pricing your services much easier, you’ll likely end up not getting paid based on the real value of your work. And that, is why we recommend value pricing.

Value-Based Pricing Accounting Services

This method takes into account the value that the accounting services bring to the client’s business. Instead of focusing solely on the time and effort involved, the fee is based on the perceived value of the service provided. For example, if an accountant helps a client identify tax-saving strategies that result in significant cost savings, the fee might be a percentage of the savings achieved.

This is the method we recommend to our clients. Value pricing is the key to raising profits, aligning with client expectations and earning the right value for your expertise. It may not be the easiest pricing method, but it is the best. And, we’ll walk you through a more detailed guide to value pricing below. 

Additional Methods For Accounting Services Pricing

Project-Based Pricing: For larger projects or specific engagements, accountants may offer project-based pricing. The fee is determined based on the scope of the project, the anticipated level of effort required, and any additional factors such as deadlines or complexities. This method allows clients to have a clear understanding of the costs upfront.

Retainer Fee:
In some cases, clients may require ongoing accounting services on a regular basis. In such situations, accountants may charge a retainer fee. This involves the client paying a fixed amount on a recurring basis, usually monthly or quarterly, to secure the accountant’s availability and services.

Blended Rate: A blended rate is a combination of different hourly rates within an accounting firm. The firm may have accountants at varying levels of experience and expertise and a blended rate averages out these different rates. This method ensures that clients receive the necessary expertise while maintaining a consistent pricing structure.

How to Value Price Accounting Services (With a Value Ladder)

how to value price 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.

a. Advisory Services (AD)

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.

b. Max Compliance (MC)

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.

c. Basic Compliance (BC)

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.

Meet Your Clients Where They Are​

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.

Convince Growing Clients to Ascend to the Next Tier of Your Accounting Services

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.

Take Advantage of Affiliates & Strategic Referrals​

affiliate and referral marketing

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.

Want Hands-on Pricing Help?

Are you struggling to price your accounting and bookkeeping services? You’re not alone, it’s one of the most common questions we get inside the Create Your Dream Firm program.

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 to 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.