How to Price Your Accounting Services to Reflect Your Value

In every accounting firm—whether a fledgling startup or an established industry leader—the question that consistently echoes is: "How can we optimize our pricing strategy?"

According to the Bureau of Labor Statistics, the accounting field is projected to experience a 4% growth rate from 2019 to 2029. Fast forward to 2023, and the market's expansion is visibly accompanied by escalating competition and mounting pressure on fees.

In this hyper-competitive environment, pricing is far more than just a logistical necessity or a back-office calculation. It is a dynamic, strategic instrument capable of making or breaking your practice's success. Properly executed, your pricing strategy not only ensures business viability but serves as a powerful lever for competitive differentiation and client retention. Therefore, it's crucial to treat your pricing model with the attention and agility it rightfully commands.

The Need for Effective Pricing Strategies

Effective pricing isn't just about covering your costs and securing a profit margin. It's about conveying value, competitive differentiation, and customer satisfaction.

A well-calibrated pricing strategy can:

• Maximize Revenue: Proper pricing enables you to extract the optimum value from each client engagement.
• Client Retention: A transparent, fair pricing structure increases client satisfaction and loyalty.
• Business Positioning: Your pricing reflects your positioning in the marketplace, signaling the level of service and expertise clients can expect.

Given the strategic importance, let's explore the traditional pricing options and provide actionable insights to implement them effectively.

The Traditional Pricing Models

1. Hourly Pricing

Hourly pricing is one of the most straightforward and commonly used billing methods in the accounting industry. Under this model, you charge clients based on the number of hours spent on their account or project. This pricing strategy is transparent and easy for both parties to understand—the clock ticks, and the bill accrues.

When is Hourly Pricing Recommended?

This method is best for projects with uncertain or changing scopes, such as complex tax cases or fluctuating work volumes. It ensures you're fairly paid for all time spent, from tax complexities to financial audits.

Actionable Tip:

Track and analyze the time spent on different tasks and types of client engagements. This will help you arrive at an average hourly rate that is not only competitive but also allows for your targeted profit margin.

Example: If you find you're spending an average of 5 hours on basic bookkeeping services for a small business, and you aim for a profit margin of 20%, an hourly rate of $100 could be justified ($500 total).

2. Flat Rate

Flat rate pricing means charging a fixed, upfront fee for a bundle of services. This approach eliminates billing surprises and increases trust between you and your client.

When is Flat Rate Recommended?

This pricing model is best for standardized, routine tasks like bookkeeping or annual tax prep. It's especially useful for small businesses and startups that prioritize budget predictability.

Actionable Tip:

Identify services that can be bundled together into packages and offer these at a fixed price. Make sure to detail precisely what each package includes so that clients know what they're getting—and what falls outside of the package's scope.

Example: A 'Small Business Accounting Package' might include monthly bookkeeping, quarterly reviews, and annual tax preparation for a fixed fee of $7,500 per year.

3. Menu Pricing

Menu pricing involves listing individual services with set prices, much like a restaurant menu. Clients can pick and choose the services they need, allowing for customization while still offering the predictability of fixed pricing.

When is Menu Pricing Recommended?

Menu pricing works well when your clientele has diverse needs that don't neatly fit into bundled packages. It's ideal for situations where clients may require one-off services or a unique combination of tasks, whether that's different types of tax filings, consultative services, or audits.

Actionable Tip: Create a 'menu' of services with fixed pricing for each. Allow clients to select and customize based on their needs.

Example: For business tax services you could do the following

• Offer a basic package at $1200,
• A standard package at $1500 which may include some planning, and
• A premium package at $2000 that would include advisory and strategy
• Each would include some details of what each entails.

4. Revenue-Based Pricing

In revenue-based pricing, the cost of your accounting services is directly tied to your client's revenue. Instead of a flat or hourly fee, you charge a percentage of the client's revenue, creating an inherent alignment between your success and theirs.

When is Revenue-Based Pricing Recommended?

This model is particularly effective when working with high-growth businesses where the revenue figures can show significant upswing. It ensures that as the client's business grows, your compensation scales in tandem. However, it's crucial to assess whether this pricing model aligns with the kind of services you're offering and the value you're adding to the client's business.

Example: If you're working with a startup that expects rapid growth and has a current revenue of $1M, a 1% charge would amount to an annual fee of $10,000. This not only aligns your incentives but also scales your fees as the client's business grows.

5. Value-Based Pricing

Value-based pricing focuses on the tangible benefits or results you deliver to your clients, rather than the time spent or the tasks completed. In this model, your fee is set based on the value or savings you bring to your client's table.

When is Value-Based Pricing Recommended?

This model is most impactful when you're offering services that lead to quantifiable financial gains or savings for your clients, such as tax optimization strategies or financial planning. It's particularly suitable for services that have a direct, measurable impact on a client's bottom line, as it makes the value proposition clear and justifiable.

Actionable Tip: Start by having a conversation with your client about their goals and what they value most from your services. Once you've identified the key areas where you can add substantial value, price your services accordingly.

Example: If you implement a tax strategy that saves a client $20,000 in a year, a $5,000 fee for your services would be justifiable. Here, the client is likely to perceive the cost as a worthwhile investment, given the significant savings you've provided.

Key Actionable Steps for Successful Pricing

• Market Research: Understand what competitors are charging for similar services. This sets a baseline for your pricing strategy.
• Cost Analysis: Account for all costs, including overheads, to ensure your pricing covers expenses and leaves room for profit. (Cost Plus Pricing)
• Dynamic Pricing: Regularly revisit your pricing strategy to adapt to market changes, technological advances, and inflation.

Immediate Actionable Step:

To choose the best pricing model that reflects your value, start by conducting a thorough self-assessment of your skills, experience, and the unique solutions you offer.

Map these against the specific needs and pain points of your target clients. If your expertise lies in saving clients time or offering specialized financial insights, consider a value-based model that capitalizes on these benefits. Alternatively, if your strength is in providing a broad range of services, a menu or flat rate pricing may be more aligned.

Always remember, the price should not just cover your costs but should also clearly communicate the unique value you bring to the table.

Your Price, Your Value, Your Success

Mastering the art of pricing isn't just about ensuring financial viability; it's a manifesto of your value, your expertise, and the unique proposition you bring to the table. As the dynamic accounting landscape continues to evolve, so too should your approach to pricing.

Don't just set it and forget it—continuously monitor, adjust, and align your pricing to reflect the value you provide and the market you operate in.

As we wrap up this comprehensive look at pricing strategies, I'd like to invite you to pause for a moment and reflect. Question to ponder: How well does your current pricing strategy align with the value you offer to your clients? Are you truly getting paid what you're worth, or are you short-selling your expertise?

I'd love to hear your thoughts and experiences—please leave your comments below.

For those who are ready to take a deep dive into optimizing their pricing while scaling their accounting, bookkeeping, and tax businesses, I have a special invitation. Check out my 4-part video course, "Learn the Turnkey Process for Starting and Building Your Very Own Premier Accounting, Bookkeeping & Tax Business."

In this course, you'll gain actionable insights into:

• Ensuring you get paid what you're truly worth
• Understanding the major forms of billing, ranging from Hourly to Value-Based and all the shades in between
• Weighing the pros and cons of each method, thereby giving you a comprehensive view
• Identifying the BEST way to price your services that is both profitable and professional

Click here to access and unlock the keys to a pricing strategy that powers both your profitability and your professional growth.

About Roger Knecht

Roger Knecht is president of Universal Accounting Center, a post-secondary school for accounting professionals. With over 20 years of marketing, sales, HR & operations experience, Roger Knecht has helped thousands of business owners work ON their businesses to increase revenue, improve profits and build value. His strong work ethic and collaborative style delivers reliable, high-quality results for business owners.

Roger’s podcast, Building the Premier Accounting Firm, keeps accounting professionals on the cutting edge of the industry offering quality bookkeeping, accounting, and tax services. He hosts discussions with some of the accounting world’s best minds and shares actionable insights for firms.

Roger is the author of “Your Strategic Accountant” and “Your Profit & Growth Expert”, each written to help business owners understand what they can expect from the accounting profession.

Universal Accounting provides accounting professionals with the training, certifications, coaching, and support they need to become Profit and Growth Experts for their clients.

If you want to have the premier accounting firm in your area contact Roger and his team at 801-265-3777 or visit them online at www.universalaccounting.com