Most accountants are low-balling their fees and how to fix it
If you were to ask five passengers sitting in the same row together on a plane how much they paid, chances are each one paid a different amount.
Some of the most profitable accounting firms use a similar strategy to charge not what the service actually costs but what the client is willing to pay.
Your clients don’t care how much you need to earn to keep your business afloat; they care how much value they’re receiving at a particular price.
You can price higher than your competitors because you’re basing the pricing off of the client’s perceived value, or what the client says they’re willing to pay. If they’re willing to pay more than what your competitor is charging, then that means more money in your pocket.
To see value-pricing strategy in action let’s compare two accountant’s sales-closing pitches.
Accountant A and Accountant B both offer full-service accounting, including bookkeeping, tax preparation, tax planning, outsourced CFO services, payroll and client advisory services.
Let’s say that Accountant A charges $700 per month for these services and Accountant B charges $1,400 per month.
Accountant A is just about to close the deal with the business owner for $700 per month, but at the last minute the business owner decides not to move forward because it’s “too expensive for me.”
Accountant A goes on about how many years they’ve been in business, how great their customer service is, how many “satisfied customers” they have, etc.
The business owner has heard this same pitch a dozen times and he really doesn’t care about how cool the firm’s new online client portal is.
Accountant A ends up losing the sale.
The truth is that in today’s highly competitive accounting landscape, most customers take it for granted that you have good customer service and that you’re a professional that will do good work for them.
The problem is they are comparing you to a dozen other CPAs in the area.
You are effectively competing with the exact same “features” that other firms claim to have.
You are therefore reduced to a commodity and, everything else held constant, they are going to choose the accountant down the road for ten bucks less.
Now meet Accountant B.
While Accountant A jumped into his fees only 10 minutes into the consultation call, Accountant B takes a different tack.
Accountant B knows that the client’s business (let’s say its a single-member LLC) is making $500,000 per year in profit including the owner’s salary.
Based on his initial consultation questions, Accountant B knows that he’s going to save the business an average of 15 to 20 percent a year in tax savings based on experience.
This will include identifying savings opportunities such as reviewing owner wages versus distributions, saving on Social Security taxes, deferral and prepayments, entity structure management, bonus depreciation and much more.
He therefore confidently tells the business owner that he expects to save him approximately $75,000 to $100,000 in the first year (perhaps a bit more or less, but this falls well in line with his typical 15 to 20 percent savings for this kind of business).
Accountant B ends the conversation by saying, “Based on the information you’ve provided and my many years of experience with your industry we expect to save you approximately $75,000 to $100,000.It may be a bit more or a bit less once we fully review your situation. The price for our relationship will be $1,400 a month, and we can start immediately.”
Which accountant do you think that business owner would hire?
In most cases, the business will choose Accountant B because he established value before price.
He also projected his professional expertise based on the many businesses he’s helped in the past and effectively showed the prospect that he will be saving him about five times more than what he will be charging for his services.
Of course, this is just one element of value pricing and there are dozens of other factors that an experienced accountant needs to consider (Bookgel calculates over 50).
At its core, value-based pricing is simply basing a product or service’s price on how much the target client believes it’s worth.
If you can effectively communicate your value before your price, you not only increase your sales-closing rate but also maximize your up-sell and cross-sell opportunities.
When prospects have this kind of consultation experience, it’s exactly the confidence that makes them choose you versus the guy down the road that uses the same tired pitch as everyone else.