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Experts speak: 5 tips to ensure you get pricing right from day #1

11th Jun 2024
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Speak to 10 different people and you'll get 10 different views on money and pricing. But get it right and you can really maximise revenues. Here are 5 tips, tricks and need-to-know points.

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In Sage's recent webinar with Accounting Web, two inspirational practice owners, Samantha Mitcham and Jonathan Goff, were asked for their advice, stories, and what they wish they’d done differently when starting out in practice.

The previous blog here at Accounting Web examined ways they achieve the flexibility and work-life balance that they (and the rest of us!) went into business for.

But in this blog, they talk all about pricing. How can you price your services in a way that not only wins over your first few clients, but also lays the foundation for sustainable income and growth?

1. Value or transactional?

You may have already heard of two common pricing concepts: Value-Based Pricing, and Transactional Billing.

  • Value-based pricing is a strategy where the price charged for a product or service is based on the perceived value it offers to the customer, rather than the cost to produce it or the price of competitors.
  • Transactional billing typically refers to a pricing strategy where charges are based on the number and type of transactions processed by the service provider. For example, an accounting firm might charge based on the number of invoices processed, or financial reports generated.

Sam and Jonathan discuss this below, but first you need to consider what technology underpins your pricing structures. 

2. Get the right tech

GoProposal by Sage is designed to help you price consistently, sell more confidently, and minimise risk. It's part of the NEW Sage for Accountants plans (along with many other key apps), although you can also subscribe to it individually. 

GoProposal is the perfect tool for getting pricing right from day one with any client. You can:

  • Quickly adjust and provide detailed proposals based on the specific services, using a user-friendly interface that can be filled out in the meeting.
  • Deliver an easy-to-read menu of accountancy services that can be selected and deselected to generate full pricing transparency.
  • Generate optimal pricing recommendations through the Core Pricing Matrix, and change anytime to react to market demands.

Learn more about the NEW Sage for Accountants plans

3. Which pricing plan to choose

When Sam Mitcham set up SJCM Accountancy in 2019, she chose a value-based pricing approach over time-based billing. “The more value we add, the more your business will grow, and as your business grows, so will our fees. Everyone’s a winner,” explains Sam.

“We all saw a huge shift in the industry where we stepped away from hourly billing and timesheets. Now, I think that we’re seeing a semi-circle where many practices are doing timesheets again to see if a job is profitable. What we’ve learnt is that clients don’t like unpredictable fees or charges. I think that’s where the whole fixed pricing model came from. Now,many practices have gone a step further and looked at things like transactional billing, whereby they are charging the client by transactions in terms of purchase invoice volume, sales invoice volume, and bank statement lines,” says Sam. 

“The beauty of this approach is that if a client’s business is doing well, your fees also go up because their transactions have grown positively. All my clients know what their bills are going to be and many of them are on monthly set fees. One thing that I’ve learnt the hard way is that you need regular check-in points. Unless you’re doing up-to-date transactional billing, you need those to avoid scope creep. Always ask your peers, ask people that have been there and done that, watch webinars like this one, and learn from others’ mistakes,” says Sam.

“Only you know your practice and the kind of business owners that you’re working with. Therefore, your pricing structure must support not only their business model, but also the personalities that you’re working with. If I was to give one tip, for anybody that was starting up, it would be to never do work for free, especially for tasks that you might want to bill for in future. Never say that there’s no fee!”

Jonathan Goff, the Director of JPG Accounting Ltd, shares Sam’s monthly set fee philosophy.

“From our point of view, monthly fees mean that we get the cash flow on a regular basis. And for the client, they want to know what they’re spending just like they would a broadband subscription. Do your research before you start then take what others say with a pinch of salt and adapt it to your own business plan and requirements. Above all, make sure you pay attention to your pricing. That’s one thing that I didn’t really do when I first started up,” says Jonathan.

4. Pricing for ambition and scale

Depending on your client base, it’s crucial to consider early on whether or not you’ll be VAT registered. In the webinar, Sam and Jonathan touched on the importance of a business plan for establishing your business and to give careful thought to the legal structure you use and whether to voluntarily register for VAT . When you draft your business plan, consider how much revenue you expect to make in your first few years, as well as the size of your future client base.

Incorporating the additional 20% early into your business plan will help mitigate the price hike that might incur if you later register for VAT. If the majority of your client base are small business owners and tradespeople who are not VAT registered themselves, that 20% difference might influence their choice of accountant.

“When you’re pricing your services, aspire to size. At some point, you will be breaching that £90,000 threshold, perhaps incur software costs, and will be thinking of recharging. It’s key to create a pricing structure that will price for the potential size of your practice in maybe two or three years’ time, and avoid the difficult conversation of increasing fees by 20% or even 30% to afford a new staff member.”

5. Ways to get started

Start with these precepts in mind and you won't go far wrong:

  1. Ensure you value yourself correctly and create a pricing structure that will sustain your practice for the next two or three years.
  2. Regularly check-in with clients so that they know what they are paying. Nobody wants surprise invoices from their accountant!
  3. You know your business and clients best. While it’s important to learn from our practice accountants, make sure that your pricing approach suits you and your clients. Don’t be afraid to take others’ advice with a pinch of salt.

    Conclusion

    Setting the right prices when starting your accounting practice is not just about covering costs – it’s about building a foundation for growth and sustainability. By considering all costs, valuing your services competitively and appropriately, maintaining consistency, and using technology, you can establish a pricing strategy that supports your business goals and fosters long-term client relationships.

    Learn more about the NEW Sage for Accountants plans

    Sign-up for the Sage for Accountants Free plan and get the following allowances at no cost, or select Standard or Premium plans for even more allowances:

    • Accounting Plus subscription for your practice
    • Payroll subscription for your practice (up to 50 employees) 
    • Free Final Accounts and Tax for clients
    • Free HR essentials with Payroll subscription
    • Client Management for your practice
    • 10 AutoEntry documents and 5 AutoEntry bank statements per month
    • 1 GoProposal client proposal, 1 GoProposal Smart Engagement letter and 1 GoProposal KYC (Know Your Client) Risk Assessment per month
    • Listing on Sage Accountants and Bookkeeper directory 
    • Expert support and training 
    • Sage member benefits
    • Member only discounts on Accounting and Payroll for your clients

    Sage for Accountants is for practices wanting to automate pricing, client engagement, client management and data entry to support clients. Find out more about how Sage for Accountants and Bookkeepers can help you set up for success here.