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 have had 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. In the third and final part of our discussion, Ed explains how ALAs’ success can be measured as well as necessary next steps to take in their lifecycle:
AW: How can/should firms measure the success of having ALAs?
Ed: The language of what KPIs stand for changes. KPIs are retrospective, they look backwards. This [ALA] model enables KPIs where “P” is not “Performance,” but “Predictive” for success for the future.
Also, there’s the terms “measurement” and “metric.” Measurement is objective, they are hard numbers with little change. Metric, however, is a calculation or taking what is subjective into an objective number.
So, instead of looking at financial data you can look at net promoter score. Understand the likelihood of recommendation from your clients. When net promoter is improving, you are likely to see future upticks in performance or profits.
Also, look at on-time performance. For each engagement, did you complete it on or before date you said you would? All engagements should have one or more objectives.
AW: What changes can you expect after proper implementation?
Ed: Higher levels of team satisfaction, as well as client satisfaction. You can potentially get rid of time sheets and that can help with recruiting. Typically, what we see is that firms double or triple profitability even if they don’t grow revenue. They also see a reduction in number of customers they serve.
It’s about working less and making more money. You don’t have to deal with the customers that don’t get it. Expect that you will be able to seek more opportunities than fixing problems.
AW: In the same right, what if adjustments need to be made to the ALA?
Ed: They can and should be changing it, [ALAs] should be something that evolve over time. You can start with something pre-determined, but always seek out areas you should expand into.
At the same time, build those things into the value proposition without changing the price much. That will continue cycle of adding more customers who what to use you for their entire wallet share. It’s healthy for relationships to be feeding and weeding.
We hope you enjoyed this Q&A series, but if you have any additional questions, feel free to download this guide on Creating Access Level Agreements and get in touch with Sage on any further assistance.