Pricing Your Services, Part 2: Time and Money
By Jennifer Katrulya, CPA, CITP, CGMA
In last month’s article – Three Steps to Pricing Your Services, Part 1 – I discussed the three steps you’ll want to take to figure out the costs of value-priced, fixed-fee engagements. Changing your pricing model is no simple task, but it is something beneficial for your clients and your firm.
There will be few, if any, surprises when clients receive your invoices, and from a firm perspective, you’ll be able to retain your clients for life because you’re focusing on service rather than pricing. This demonstrates “value” and your commitment to growing their business rather than the sometimes-petty feeling we get when we’re charged for each and every service.
In addition to the three steps I discussed last month – cost of labor, technology, and contingencies – there are a number of other investments of time and money that need to be factored into the overall pricing calculations for your firm.
Education and training. Will you need to attend any special seminars, purchase specific reading materials or make any other education investments in order to provide the highest level of service to this client? If the answer is yes, you’ll first want to take a step back and consider whether this means you’ve stepped further outside of your target industry vertical than would make sense for your firm. If, instead, there is a specific course offering or other training that would enhance the relationship, you’ll want to factor that into your fee estimate.
Client welcome gifts and ongoing appreciation efforts. Your firm is becoming increasingly selective about only bringing on the “right” kinds of clients who are a good fit for what you offer. When you welcome clients to your firm, do you roll out the red carpet and take extra steps to keep them feeling appreciated?
Some simple ways to do this might include sending handwritten welcome cards and small gifts, thanking clients for giving you the opportunity to work with them. During the new client interview or phone conference, did you write down your client’s birthday and the birthdays of other key contacts in the client’s office? Did you ask about their favorite hobbies? What about a gift for the holidays or for New Year’s?
If you keep track of these events in your client relationship management system (CRM), you can make sure that you acknowledge clients on their special day. You might also acknowledge their anniversary as clients of your firm, special awards they may earn over time, and charity events they elect to participate in, for example.
What all this means is that you’ll need to set aside a small monthly budget as a portion of your total pricing that includes the gifts and staff time it takes to track and manage these efforts.
Research and development. Do you fight for the time to keep up on your professional reading, researching new product and service offerings, and other business development? Consider what it would mean to your clients if they received an e-mail from you or a handwritten note in the mail with an article containing valuable information for them based on current events in their business. By making this part of your scheduled time, allowing your staff time to do this, and budgeting for it as part of your client engagements, you’ll leave yourself and your team with the bandwidth and overall profitability to invest this time and keep your firm thinking outside the box in very visible ways.
What Would Their Alternatives Cost?
Once you’ve buttoned up the costs and fee estimates for your prospect proposal, there’s one more step in the pricing process you’ll want to consider. If your clients were to hire staff internally to provide the mix of expertise they need, how many positions would they need to fill and what would that cost? What is the value of the time they would need to invest in managing that staff? What other costs would they incur relating to accounting and integrated software, IT support, office space, equipment, and other costs to support maintaining these functions internally?
When you’re calculating this, don’t just consider the staff, technology, and other resources your prospects may have in place today. Instead, consider what they would need to invest in if they wanted to solve for the pain points that brought them to you in the first place. What would that truly cost them? Once you estimate this, compare that to the fee estimate you would have proposed before completing this step.
Would their investment be significantly more than you would have charged them based on your prior cost-plus calculation? If so, then you’ve just identified even more of your firm’s added value! You may want to factor this into your fixed-fee quote because it gives you the additional financial resources to reinvest in your firm’s offerings, staff, and other areas. Running a profitable firm that can afford to make these investments will create an ongoing cycle with increasingly positive rewards for you and your clients.
Successfully pricing accounting services engagements takes practice! It also requires a willingness to walk away from a prospect who doesn’t wish to accept the fee proposal you’ve prepared. Don’t feel tempted to discount fees in order to win an engagement every time a prospect objects to a fee. If you agree to take on clients who don’t compensate your firm based on the true value of your knowledge and services, you won’t be in the position to accept the next opportunity, which may be just the one you were hoping for!
More articles by Jennifer Katrulya:
- Three Steps to Pricing Your Services, Part 1
- The Ideal Client and Referrals You Don't Want
- Providing a Five-Star Client Experience Every Day
About the author:
Jennifer L. Katrulya, CPA, CITP, CGMA, is president and CEO of BMRG, LLC. Katrulya provides advisory and mentoring services to growing and large CPA firms seeking to successfully establish best practices, educate, and motivate management and staff during periods of change and to streamline integrated processes in a hosted and SaaS environment. She is a frequent author and instructor on a wide range of technology topics. Katrulya also serves as a consultant for a number of software developers who seek input from her regarding their anticipated road maps and strategic plans, constructive feedback about solutions and/or features as they are developed, and ongoing feedback from her as her firm and BMRG's clients use many of the solutions. Contact her at [email protected].