By now you’ve all been urged in some capacity to move towards more advisory-based services, given the advent of automation and evolving business needs. This has of course made it more challenging to charge by the hour.
So how do you price? One way being touted is a breed of value pricing known as an Access Level Agreement (ALA), whereby your client (or customer, if you will) “subscribes” to your firm; not any particular partner or agreed price, per se but to Your business.
During this three-part Q&A series, we will have Ed Kless, Senior Director, Accountant Solutions at Sage Software, explain the idea behind and benefits of an ALA, as well as the details of structuring one and its implementation.
Ed and his VeraSage Institute partner Ron Baker have been tireless advocates of the benefits of value pricing and this latest effort, in tandem with Sage, essentially takes this pricing practice to the next level. The first part of our discussion goes into the basics on an ALA and how subscribing to a firm works:
AW: Can you give us the basic definition of an ALA and how it came about?
Ed: For the past five years or so, I’ve been speaking about the idea of Service Level Agreements and made a point in a presentation that what we as consultants/accountants sell is not services but knowledge and its transfer. Someone attending the presentation said “if we are selling knowledge and not service, why call it a Service Level Agreement?” I said “you’re right,” so then and there I crossed out the “S” [in SLA] and said lets now call it an Access Level Agreement. It’s access to that knowledge.
There hasn’t been anything better to call it so we’re staying with [ALA]. We are looking to help establish what Level of access a client wants from a professional. Because one of the things previously SLAs were built around was the billable hour it made sense to change it. We’re not talking about hours, because billing that way the customer doesn’t know before they call if they have a 15-min. problem, 15-hr. problem or 15-day problem. With billable hours in an SLA you create a barrier to them contacting you, ALAs help take that barrier away. With ALAs, we are going to create a fence between the levels of service and the client can decide which level they want.
AW: Can you explain the idea of “subscribing” to a firm?
Ed: It’s not about what we “could” do for you, it’s if you subscribe to us, we will do it for you. For example, Porche now allows you to subscribe to Porche the company, not the car itself. In the Atlanta area, you can have your day-to-day car from Porche and a weekend car you can swap out. You just pay for access, put in the gas and they take care of everything else. It’s not a lease, it’s the company.
I thought well how can you subscribe to a professional firm and we are beginning to explore this notion, you can flesh out over time. You can do monthly or annual and if you need it the firm will do it. It’s about moving away from fire-fighting and moving towards fire insurance or even fire prevention. Your job as a firm [with an ALA] is now to make sure client has no problems, it’s about being proactive.
AW: Why is this happening now?
Ed: I think ALAs have needed to exist for a while, but customers understand this model because they are using it in other aspects of their life. Look at all of the services that you subscribe to that you use because when you need it, it will be a value to you. Sure, you can cancel at some point but we as a service-oriented public have gotten used to it from. Things like Netflix and Amazon are a great example.
AW: What are the basic components of an ALA?
Ed: We don’t know the exact form ALAs will take at the firm level, but there are some basic components. First is response time, next would be some cadence of interaction (i.e. once a week, month, quarter, etc.) where you have a regular conversation, you pick. After then it’s specific to a firm or industry.
Say you have tax clients, at the cheapest level you do their taxes as usual and if they get something from IRS regarding their return they are on their own to deal with it but for a small fee you can advise them on what to do. At a medium level, if there’s the same you can advise on the specifics of a reply to the IRS. Then, at the top level of service, the firm replies on their behalf.
Ultimately you need to give your clients choices, they don’t all want superior, A-grade. Show them what you get at C-grade and let them decide. It may or may not be of value to your client, but in the end you offer three choices and let them decide.
Next week, Ed and I discuss more specifics of setting up an ALA, what you can expect and how you can measure its success. Also, feel free to download this guide on Creating Access Level Agreements.