Editorial Manager/US Team Lead
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What You Still Don’t Know About Value Pricing

Oct 14th 2016
Editorial Manager/US Team Lead
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There was a time when the mere mention of value pricing to accountants drew ire and vitriol on par with a personal attack on freedoms and beliefs, or even a family member.

These days, while still a hot-button issue, accounting professionals are embracing the practice more, but there remains core questions about how charging clients in this way truly works for them and the firm. Professional bookkeeper Marnie Stretch wasn’t always a believer in value pricing and is now an advocate despite her challenges.

She will be speaking on her personal experience with value pricing at the upcoming Accountex USA (formerly SleeterCon), and during our recent Q&A session, she explains a bit of her journey, as well as the questions and issues accounting professionals still have.

AW: What are the most common misconceptions about value pricing?  

Stretch: It becomes a catch-all term when people don’t understand the proper use of the term. People say “value billing” a lot, but pricing is about the customer. They think any time you apply a fixed or flat rate that is value pricing, and that’s not true. It’s about service. We may deliver a different level of service to each customer and they don’t necessarily get the same price. It’s not menu pricing and it’s not really based on transactions either. Moving from hourly to fixed is a right step, but it’s not value pricing. We need to disconnect from time and focus on knowledge because that’s what I bring. Hourly billing is really a disservice to your clients and to your firm.

AW: Do you think value pricing is more accepted by firms now and why?

Stretch: I’d say so, but it’s like the PC/Mac debate: some people are on board; some will resist. I remember first hearing Ron Baker speak five years ago and it felt like the conversation wasn’t really happening at all. Now there’s a good conversation and education around what it truly is. The conversation is great; fixed, value, whatever, it’s moving away from hours. Now it’s expanding to what is value pricing in its intended form and people want to know more. Social media has really helped because it gets people to talk about it, and even if you are just an observer, you are curious and looking into it.

AW: Conversely, why is there still resistance to adopting this practice?

Stretch: The hourly model is so deeply engrained, and when people call, they just ask our rate out of the blue. So, if we’re visiting a customer’s office, it’s hard to get away from “I’ve been here for four hours and I know what to bill.” It’s also an easy concept: work these hours, quote a rate; but with value pricing, it is a journey. I will problably be working on it until I retire, but every time you price a customer, you move a step away [from the hourly model] and it takes a lot of time and work.

AW: How long did it take to implement at your firm? Explain the challenges.

Stretch: My firm is mainly just me, and after hearing Ron Baker speak five years ago, I started thinking about it. Every year Ron would come speak at the IPBC conference here in Canada and I would learn a bit more. For me, I am still implementing. I have largely instituted it, but I have some clients that still are not there and I have to work on it.

There are a lot of facets to value pricing. It has to start with your own value; for me that was most challenging. I needed the right mindset and you have to talk to people doing it. The old conversation was “I have this problem, can you solve it?  How much do you charge?” That has to change. You don’t always know the words; you don’t know the responses or questions to ask. Don’t be afraid to ask; you make assumptions about your customers that they know what they want and you don’t always. Learning the right questions is an important part of the process. I haven’t completed the transition yet.

You can also underestimate your work, and that’s another problem. You have to build in “what if” scenarios. Once you do this for your first year, then you need to have the follow-up conversations with your customers when we’re so not used to just doing that or maybe not speaking as often as we should.

AW: Are there any instances with clients where value pricing would not work?

Stretch: I’m going to say no. I do a lot of consulting and an accountant that does tax may disagree, but I think customers would be more open to having a fixed or value price even for tax returns. Many more accountants are doing a flat price, and consultancy can be challenging, but it provides more opportunity to value price. The customers I have that aren’t on the value pricing structure I just haven’t had that conversation with them yet.

Replies (2)

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By Richard A
Oct 25th 2016 16:09

We are helping Tax CPAs develop VbP for tax returns without putting their current practice at risk. For more information, see https://www.thetaxcpas.com

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Will Keller
By Will Keller
Oct 25th 2016 23:39

Great topic and another great interview/article from Seth. Quick question for Marnie: Ron says to estimate your hours in advance and then use that as one of your foundations, but I've discovered that most new clients and projects (especially cleanup/repair jobs) are virtually impossible to estimate, and using change orders is problematic because clients hate after-the-fact price increases . How do you deal with those situations? And you're right, value pricing is definitely a journey (and not an easy one).

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