Pricing = Self-Esteem

VeraSage Institute Senior Fellow Daryl Golemb has continued to astound me with his firm's innovative pricing strategies. I met Daryl in 1996. He immediately embraced the ideas behind Total Quality Service and value pricing. He was one of the first firms to offer a menu price. Later on, he innovated the concept of the Perpetual Fixed Price Agreement [FPA], carving out the "evergreen" services that CPAs provide their customers annually--such as tax returns, tax planning, financial statements, etc.--while drafting an FPA that only focused on the customer's changing wants.

At one of VeraSage's Sole Proprietor Retreats, Daryl said something that blew my mind. I'm paraphrasing here:

Not only do I have a fixed amount of capacity in my firm, but I also have a fixed amount of emotional capacity. If I'm not being paid at least $5,000 for a new customer, it's just not worth my emotional investment, and I will turn down the work.

I was stunned. I think it took me about six months to figure out exactly what he was saying, since it is so multi-faceted. Part of it is, Daryl understands his value, and is not afraid to price for it. Another part is that high price tempts. Sure, we say that, but what does it mean?

It means that establishing a high price, and sticking with it, conveys something about your value, not only to your customers, but to yourself. It is a self-fulfilling prophecy, an ever-increasing upward spiral of value creation.

Well, Daryl has raised the bar again. In an e-mail that generated an incredible HSD™ for me, here is what he wrote (he graciously gave me permission to reprint it in its entirety):

Good morning Ron! 



Beginning with the Verasage conference, and continuing with the Sole Prop Retreat, I have been thinking about our current pricing for entering into a new relationship. Our previous amount was vague--more than $5,000 but less than or up to $7500. I came away from the conference believing that the amount needed to be firmly $10K for all new customers that desire business and life coaching [Daryl's specialty]. Now, this is not our fixed price target amount, but rather the floor for entering into a relationship.

The power of fixing the amount has been tremendous. Astoundingly, I have used this in conversations with new customers twice this week, and we are proceeding down the path with both customers of outlining the scope and price of our agreement. Our initial conversation set not only the table stake, but also the quality of the relationship we were seeking to have with our customers in a way that $5,000 didn't do.

The first conversation was for an engagement for simple corporate and individual tax preparation. The price range this individual had in mind was $4500, which is somewhat higher than he is paying now ($3500 I think). Once I had an understanding of what he was looking for in us, I explained what I was looking for in deciding to take on a new customer. I think he was slightly shocked that the answer wasn't automatically yes--that just because he was willing to buy meant that I was willing to sell. I explained that I have 25+ years experience in the profession, and that simple tax preparation didn't do it for me anymore. I went on to say that I have a very clear understanding of the engagements that bring us professional satisfaction, and those that don't. For everyone's benefit, I do not take on engagements that don't feel great. 



We then had a conversation about business coaching, and the many possibilities that could spring from our conversations. At this point I learned that his parents were active shareholders in his corporation, and would really benefit from these services as well. They have an established relationship with a CPA, but always want more from him.

We came to a verbal fixed price agreement for $14,500, for the following services:

  • Quarterly coaching meetings for the purpose of setting corporate goals.
  • Financial, tax and estate planning conversations with Mom and Dad as necessary to round out the relationship with their current CPA.

  • Financial, tax, and estate planning conversations with him and his wife as necessary.
  • Unlimited telephone and email with their bookkeeper, who according to the customer, is extremely capable and will look for guidance on big picture planning for the corporation.
  • Corporate tax returns, and tax planning as necessary.
  • Personal tax returns, and tax planning as necessary.

Under our previous relationship pricing, I most likely would have priced this agreement at $7,500 to $8,500. Raising the bar on the value of getting into a relationship with us, gave me the courage to ask for more.

I can't wait to get started. It feels good to look forward to working with a customer, instead of dreading 'when am I going to fit this (boring) work in?'

Best regards,
Daryl

This type of pricing isn't for wimps, or for people who want to tally up hours. This is pure Value communication and creation, along with capturing a commensurate share for the firm. Here is what I wrote to Daryl:

Hi Daryl, 


This is incredible my friend. It contains two great points, which I believe only advance pricers will ever understand: 1) your concept of "emotional capacity" as a basis for pricing; and 2) that high prices actually drive higher value, both in service delivery, and as perceived by customers.

If you are inspired by this story, and do something to your pricing as a result, you are at an advanced stage, probably the top 1 to 5 percent of your colleagues.

If this story frightens you, you have a ways to travel.

This blog

VeraSage Institute is the most revolutionary think tank for professional knowledge firms-we challenge the professions to break free of practice methods that hurt the professions, undermine their purposes, and fail their clients. Among our quests: burying the billable hour and archaic timesheets; pricing on purpose; recognizing that professionals are knowledge workers, not machines; and improving the professions for posterity.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42537

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74784

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47514

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

87240
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19979

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54634

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

79333

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24557

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

63053

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33943
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
101118
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
25246

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

51499
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
27078
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31380

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

98559

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32569

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

109446

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59775

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38602
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65554

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

91397

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

52502