Are Your Prices Really Too High?
There’s a good chance you’ve heard one of the following statements from a prospective client:
- "Bookkeeping in my area runs $25/hour, and my bookkeeping should only take about two hours a month. I don’t want to pay more than $50/month for services."
- "Your competitor down the road will do my books for half of what you’re proposing!"
- "Your proposal looks pretty good, but I need you to sharpen your pencil and get the price down some more."
- "You charge how much, just to do bookkeeping?!"
These statements and ones like them are frustrating and demoralizing. Today’s bookkeeper does much more than data entry and reconciliations. We specialize in industry-specific software, data analysis, troubleshooting and client education. Many of our prospects assume artificial intelligence has made our jobs easier, when, in fact, AI has created a new set of challenges that require higher-level skills.
Unfortunately, our fellow bookkeepers often exacerbate our pricing challenges. By underpricing their services to land clients, many of our colleagues help exert downward pressure on the pricing for bookkeeping services.
Competing based on price is a race to the bottom. It’s also a great way to inadvertently encourage scope creep. When clients think they can threaten to leave you for someone who charges less, they tend to ask for – and expect – more services at reduced prices or free of charge.
Escaping the Pricing Trap
The business owner who says, “Price is no object,” and means it is rare to the point of being mythical. Many bookkeepers think they can avoid the pricing trap simply by working with the “right” clients, but everyone is price sensitive to a certain degree… even us.
But this doesn’t mean you have to keep your prices lower than other bookkeepers to win and keep business. You don’t have to “throw in” a bunch of additional services to show value, either.
The trick to escaping the pricing trap is to know what kind of practice you want, and then build from there.
Start with the End in Mind with Income Targeting
At Profit First Professionals, we teach bookkeepers and accountants to do income targeting as the first step in determining their prices. I do this work with service industry clients in my bookkeeping firm as well.
When you look at your pricing through the lens of how it will serve you personally in the form of your salary or draws from your business, it becomes much harder for a prospect or client to convince you to come down on your price.
For example, let’s say your goal is to earn $60,000/year from your bookkeeping business. This is the amount you want and need to meet all your personal financial goals, whatever those might be.
To pay yourself $60,000/year, you determine your business revenues need to be $120,000/year (the additional $60,000 goes to taxes, operating expenses, and business savings for continued growth.) Now, let’s look at your average client fee.
If you charge $250/month for bookkeeping services, that’s $3,000/year per client. You would need 40 clients paying you $250/month to reach your personal income goals.
How Much Do You Want to Work?
You might be able to easily handle 40 clients if you work “full time.” But keep in mind there is more to running your bookkeeping business than doing bookkeeping. You need to allocate time for administrative work, marketing, sales calls, customer care, and other non-technical activities, too. Instead of working 40 hours per week to earn $60,000/year, you could easily find yourself working 50-60 hours per week, and possibly more during peak seasons.
Suddenly, the $250/client per month that seemed like a lot of money no longer seems like enough. You want to increase your prices to $350/month – bringing your client load down to 29 clients – but how will you get prospects to agree to this price?
Frame the Benefits for the Client
When business owners choose to work with you, they are getting a professional with knowledge in:
- Basic accounting
- Bookkeeping software – both general ledger and add-on software
- Specific requirements for their business (sales tax, payroll tax, etc.)
- Business growth
- And many other areas.
In return, you are asking them to compensate you $4,200/year ($350/month), which is considerably less than the business owner would pay an employee to do their bookkeeping, and – because you are a professional – your work quality will be much higher.
But what about the bookkeeper down the road who says they will do it for half the price?
Explain to your prospect every benefit they will get from working with you. Don’t leave anything out, and don’t take it for granted the prospect will know what you’re doing if you don’t spell it out very clearly. By the time you’re done, the prospect will think they are getting a deal.
And if they don’t… let them work with the other bookkeeper. Another prospect who will value what you offer will come along.
The Perfect Balance
Pricing your services correctly means earning enough money to support yourself personally while making sure your business has the funds necessary to continue growing AND while maintaining a healthy work-life balance. It also means working with clients who value what you have to offer them.
When you know what you want to earn and how you want to go about earning it –in terms of how much you work, what types of clients you serve, or what services you offer – it becomes much easier to state your price to prospects confidently. Even better, you can confidently turn away clients who aren’t a good fit for you and the business you want to build.
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Billie Anne Grigg has been a bookkeeper since before the turn of the century (this one, despite what her children think). She is a QuickBooks Online ProAdvisor, LivePlan Expert Advisor, and a Mastery Level Certified Profit First Professionals. She is also a guide (coach) for the Profit First Professionals organization. Billie Anne started...