My Value Pricing Journey - Part 3
In this post, I share my thoughts on creating packages, Service Agreements and pricing. In Part 2, I discussed Fixed Fee pricing vs. Value Pricing and described the benefits of Value Pricing to both the bookkeeping/accounting firm and for clients.
Taking a cue from the word “Value” in Value Pricing, it’s time to consider what exactly is the value you are offering. Our profession is now leaning towards offering two to three different tiers of services at a set fee. Here’s a few things to think about when developing your packages.
Consider making a list of the services you currently offer. Typical services including posting transactions from the bank feed, reconciling accounts, A/P, A/R, payroll, sales tax, monthly financials reports. Can you group your services into three distinct service offerings?
Perhaps you are asking yourself, “But these are all the services I already offer, so why would a client feel like they are getting more value than what they received when I was billing by the hour?” Good question! Now think about what extra value you can add to your packages. This might include a monthly or quarterly check-in call, budgeting or cash flow services, or strategic business planning.
If you plan to convert existing hourly clients to Value Price clients, you should already know how much time it takes to do the work for each client, and this will also help you to think about services you currently offer.
If you think you’ll only place new clients on Value Pricing plans, you can still leverage the knowledge you have from your past experience and use it as a starting point. No doubt, in the beginning you will be tweaking and change the packages and offerings, but you need to start somewhere.
Most firms are offering Good, Better, Best packages. The lowest level package offers the basics, the middle level the basics plus some add-ons, and the top package offers all the bells and whistles. Naming can be as simple as Bronze, Silver, and Gold but many firms are coming up with more creative names. I have seen the following:
Books In Harmony uses: The Original Bookkeeping Package, The Prime Bookkeeping Package, and The Necessary Monthly Bookkeeping Package.
Tammy's Office Solutions uses: Setup Only Bookkeeping Package, Solopreuneur Bookkeeping Package, Growing Business Bookkeeping Package.
Third Hand Bookkeeping Service uses: Solopreuneur Package, Small Business Package, Deluxe Business Package.
Services Not Offered
Putting every single service you provide into a package may not be the right choice for you. Perhaps there are some services you want to exclude from packages, but offer instead on a menu of add-on services. These might include: QuickBooks file evaluation; QuickBooks file cleanup; preparation of 1099s; completion of Worker’s Comp annual audit forms; etc. Think about what makes sense to include in a monthly services package, and what one-off services you might offer for an additional fee.
I won’t sugar coat it – determining how to price your packages is difficult. You probably already have a good idea of what the market will bear in your area for bookkeeping and accounting services. Some firms charge based on the number of transactions processed and/or number of bank statements reconciled. Others price based on some kind of sum of the tasks performed, and still others base their pricing on the gross revenues of the client. Here’s an interesting Harvard Business Review article on using the Good-Better-Best Approach to pricing to increase revenues.
There are many different formulas from which to choose. In the end, you’ll have to decide what feels right to you.
Don’t forget: Value Pricing includes all the subscription fees, so be sure to factor in the monthly costs of all the subscriptions in your tech stack including QuickBooks(or your preferred core accounting system) and each third party app. These can add up quickly.
Here’s an interesting Harvard Business Review article on using the Good-Better-Best Approach to pricing to increase revenues.
Finally, always be sure to add some contingency wiggle room, say an extra 5-10 percent of what you think the price should be, to cover those special circumstances.
Service Agreements & Change Orders
Once you define your packages, you’ll want to create a Service Agreement for package. This is the document your client will eventually sign, and it’s where you spell out in exact detail what is included in each package. This document will protect you from scope creep – when a client calls and asks for just one little thing they never requested before.
On a recent Woodard Institute webinar, Joe Woodard suggested how to respond to special requests, along the lines of: “Sure, we can do that. Just let me write up a quick change order and send it over with a price. I’ll get that out to you right away.” What I love about this response is a.) you let the client know you can do it, and b.) you reminded the client that out-of-scope requests have an associated cost. Stop giving your services away for free!
Here’s a 2015 blog post I wrote on Top 10 Items to Include in a Service Agreement.
Creating packages, pricing and service agreements requires much time, thought and effort. Once you think you’ve sorted it all out, you may find the need to make changes, and that’s okay! It’s your practice, so do what’s right for you/your firm.
Next post: your website and onboarding new clients.
Jody Linick is an AIPB Certified Bookkeeper, a QuickBooks® Certified Pro Advisor, and a member of the Intuit Trainer/Writer network. Her company, FitBooks Pro (formerly called Linick Consulting), specializes in remote bookkeeping services for professional services firms using QuickBooks Online. You can find her series of Blog posts here.
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Jody Linick, an AIPB Certified Bookkeeper, QuickBooks Certified Pro Advisor and member of the Intuit Trainer/Write Network, heads up FitBooksPro which specializes in helping professional services providers set business goals, and using the tools available in QuickBooks Online, to manage...