Five fundamentals of value pricing
Value pricing is transforming the way many accounting firms are now pricing their services and the profits they are making, says Mark Wickersham.
The challenge is, it isn’t easy. We have to understand the basic fundamentals and here are five of the most critical ones.
1. Pricing face-to-face
You absolutely must have a price conversation face-to-face with your client (ideally in the same room, but online meetings using webcam are also very effective).
The reason for this is very, very important. You have to involve the client in the process. You have to ask the client questions to understand what they want, and what they value. Until you know what they value you can’t come up with a value-based price. And as part of that face-to-face meeting, once you fully understand their wants, needs and what constitutes value to them, you have to agree the price with them.
2. Certainty and choice
There are two things that we want whenever we buy anything.
The first thing that we want is certainty – we want to know exactly what the price is going to be. Unfortunately time-based billing fails to deliver certainty.
The second thing customers’ want when they buy anything is choice – they want to be in control of the buying process. So you must give clients options. Let’s look at that next.
3. Menu pricing
No two clients place exactly the same value on any given service.
If you give people a single fixed price I can guarantee that is always the wrong price.
One of the ways to give clients choice is by using what I call menu pricing. This is where you give people a choice of three packages. This allows you to tap into what I call “the magic of three.”
4. Get paid
Pricing is not only about agreeing the price. You also have to get paid.
We’re very lucky in the UK. We can use direct debits. It’s by far the best way of paying for professional services. One of the best solutions is GoCardless: It’s simple to use (for both you and your clients) and inexpensive.
5. Systemise your pricing
Do you remember the first point on the list? You must have a face-to-face price conversation.
So how do you do that?
You need pricing systems and there are essentially two systems you need.
1. You need a professional looking brochure for each of your services
2. The only way to give everyone a unique price, in a way that maximises your price, is software
Too often accounting professional undervalue themselves and that leads to low prices. That in turn leads to a profession where too many accountants are working too many hours for not enough reward.
That needs to change.
To become better at pricing we need to be confident. Confidence comes from having the knowledge plus the tools and systems. When the five fundamentals become fully understood and ingrained you will price with confidence.
And when you price with confidence you will get better clients, better results and have more fun.