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Pricing method for a new bookkeeping business?

I am starting an at home bookkeeping service and wanted a bit more guidance on pricing.

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I am starting an at home bookkeeping service and wanted a bit more guidance on pricing. I have done lots of research into different pricing methods i.e hourly, fixed, per transaction. In regards to fixed, I have no idea how to base it on but I guess that would come with time. Doing it on a transaction basis doesn't make sense to me as it can add more work and get very complicated depending on the transactions, so I am leaning towards an hourly rate. I understand bookkeepers charge between £15-£30 per hour and I have used a tool to work out a suitable hourly rate to cover my cost but is also at the level I am currently at.

I am just curious to know if any one can share a method or tool used to determine their price, and whether it was fixed or hourly?

Thank you very much for your time.

Femi

 

Replies (8)

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By Truthsayer
26th May 2020 09:29

Just use your judgement based on your knowledge of the market. In my view, that's all that's really worth saying.

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By SXGuy
26th May 2020 10:01

Exactly what Truthsayer has said.

I personally charge a fixed fee, but for the smallest businesses my cost is based on what id consider absolute minimum id be willing to charge to do the work for, and upscale any larger businesses from there.

At the end of the day, if a job took me an hour a month to do, id prob not consider charging £30, to put it bluntly.

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By zebaa
26th May 2020 10:34

Fixed fee is the way to go in my opinion. Customers dislike 'black boxes' that produce a bill amount that is uncertain for them. Think about how many arguments builders have despite a 20 - 50 page building contact. Your difficulty is in setting the fixed fee. Two pieces of advice on that. One, set a fee term limit, say 6 or 12 moths & review the fee after that period, but be up-front with your customer about that at first sign-up stage. Two, use a Ltd Co to trade from, if things go bad, you are likely to get out without too much damage.

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By Lucy N
26th May 2020 12:08

It makes life easier to have a fixed monthly or quarterly fee. However, when you are just starting out, it is hard to work out what that should be. Decide how much you want to earn and the amount of hours you will work. Then consider the extra admin non-chargeable hours which there always are. Once you have calculated your hourly rate based on this, make sure it is in the £15-£30 bracket, which is reasonable.
When you take on a new client, say to them that you would do the work the first month/quarter based on an hourly rate of £X but after you have been able to gauge the amount of work, you will agree a set fee with them. This also gives you an opportunity to tell them how to change the method and type of information they give you to make it easier for you, and reduce their cost, if they are willing to.
After you have done this a few times, you should be able to offer monthly pricing based on your experience and just asking the right questions.

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By David Winch
02nd Jun 2020 10:42

Femi

There is another pricing strategy you could try - I guess it's an extension of 'per project' - and see if it works for you. That is Value-Based Pricing.

You need to be comfortable with charging different clients different amounts, and you need to expect to have a conversation with each prospect before they become a client.

During that conversation you need to help the prospect work out for themselves, and then tell you, the full value to them of the result you will help create. Having gathered sufficient information from the prospect, you also need to decide how much it will cost you to deliver that result.

You can then come up with a price that gives you both a similar Return on Investment multiple.

Having established you could work together if you can reach agreement, make your proposal for a scope of outcomes (not tasks) plus the expected delivery time - then state your price.

I hope this helps, and good luck if/when you try it.

David Winch
Sales, Marketing and Pricing Consultant, Cambridge

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By I'msorryIhaven'taclue
02nd Jun 2020 11:31

There's yet another way, where you interact with your clients by allowing them to perform as much or as little of the inputting as they want and do the rest yourself. For example, some will be happy inputting their expense claims and sales invoices for themselves, leaving the purchases and bank entries to you.

I think we're about to enter a different world, in which working remotely and wearing face masks, and sanitiser for after-shave, will be more highly regarded than a low price. There'll be plenty of new entrants setting up @ just-above-minimum-wage rates, so don't try to compete on price. And if you should go the price per transaction route, it's my experience that you'll need to charge £1 per transaction if you're going to net £15 hour.

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Mark Lee 2017
By Mark Lee
02nd Jun 2020 11:41

No one, other than employer, wants to pay you for the hours you spend on their books. They want the work done and to know what it will cost them. Being a good bookkeeper is one thing but if you're going to Provide that service as a self employed person you also need to develop the skills for 3 more Ps - To be able to Promote your service (generally), to Pitch your service (to interested people) , and to Price your service so that clients will pay happily and that you earn as much as you are comfortable with for the service you are providing.

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By adam.arca
02nd Jun 2020 13:02

OK, bucking the trend a little here, I would suggest hourly rate: it's by far the most practicable and easiest method for open-ended commitments like bookkeeping.

Value pricing is a great concept in theory but extremely hard to implement (even harder than fixed pricing) especially for small, relatively low value work like bookkeeping.

Fixed pricing sounds great from the customer's viewpoint but, as you're clearly aware since you're asking the question, what on earth do you base it on when you have no track record to base it on? Are you prepared to take on the pricing risk of getting your quotes wrong? What about scope creep? If you do feel that fixed prices are the way, however, my tip would be to ALWAYS over-estimate the time you think a job will take when working out your quote because it always will take longer.

You could consider offering both fixed prices and hourly rates: a high-ish fixed price or an hourly rate to tempt those with better records and who think they'll benefit because the hours required will be less.

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