Most bookkeeping firms either use fixed pricing or per-hour billing to charge clients. They aren’t aware that there’s another type of pricing they can use - one that can bring in more profit.
If you were to rate how confident you are in terms of your bookkeeping firm’s prices, what score would you give it? Chances are, you’ll give yourself a low score. That is, you know that you provide an amazing service but your price doesn’t reflect that. This is a problem I see with many bookkeeping business owners. They set their prices lower than what’s right for them because they feel it’s what will bring in the clients. There’s the fear that if they set high prices - which is actually the right price - they’ll lose their clients. But is their fear valid? Not really.
In fact, one of my guests in my podcast, Mark Wickersham, is proof of this. He’s a chartered accountant and is also known as a profit improvement expert. And Mark is best known for helping accounting and bookkeeping firms double their profits in 18 months. With that kind of credentials, it’s hard to believe that Mark used to undercharge his services. But he did. Mark started his accounting firm from scratch and, in three years, he became successful… at least on the outside. But the truth is that while he had as many as 200 clients, he was undercharging his services. Worse, he was undercharging all of his clients! It was a mess.
Yes, he was growing his accounting firm quickly, which is the dream of most business owners. But the downside is that he was practically giving stuff away for free. What turned his situation around was when he learned about value pricing. And it’s what you’ll discover in this article. Plus, the two strategies you can use.
What is Value Pricing?
There is a general misconception about what value pricing is. But the simplest explanation is this: Value pricing is pricing based on the value that you are providing to your client. Mark admits that the concept of value pricing is “insanely difficult”. It’s not like fixed pricing or hourly pricing where the only factors bookkeeping firms consider are the length of work and the type of work. In fact, Mark gave three reasons why value pricing is hard:
- Value is subjective
- Everybody will value things differently
- Bookkeeping itself is complex. The scope of work varies from one client to another, so it’s a challenge to work out the price
While it may be difficult, it’s still the type of pricing that’s best used by bookkeeping firms to ensure they bill what they’re worth. To better illustrate the idea of value pricing, Mark shared two value pricing strategies. And the good news is that you can easily implement any of them in your bookkeeping firm.
The Two Strategies
Strategy #1. Menu Pricing
This is a very simple pricing strategy, but it’s very powerful. Because if you do it right, you can 7x your prices. So, how does menu pricing work? The key is that you give your clients several options to choose from - ideally three. Let’s say you have three packages: gold, silver, and bronze.
- Your bronze package is just your firm’s basic services, which makes it the cheapest one.
- Your silver package consists of your bronze package, plus some extra services.
- Your gold package is an upgraded version of your silver package, plus all the bells and whistles.
And to set the right price for each option, Mark said that you should use the previous year’s prices as your reference. Identify each service and how much you charged for them in the past year. When you have the total for each option, you add a certain percentage to it. Mark’s suggestion is to add 2% to 3% for the bronze package, 20% for the silver package, and as much as 70% for the gold package.
Strategy #2. Offer Bundles and Options Upfront
Continuing on from the previous strategy, the fact is that clients may not find exactly what they need in any of your packages. This is where the second strategy comes in. Think of it as upselling.
Here’s how it works: Let’s say a client approaches you and tells you that they need someone to make management reports for them. Instead of immediately saying yes and revealing the price, offer them options first. For example, you can ask them if they want a more detailed management report than what they had in mind. You can even tell them that, normally, your staff handles that service. But if they want, you can personally do the service - for an additional fee, of course.
You can also combine this strategy with your menu pricing. How? Let’s say a client wants the basic package, but they need another service that you offer that isn’t part of the package. You can tell them that you can include that service in their package for an additional fee. Chances are, they’ll say yes to the better options.
Value Pricing Can Do Wonders for Your Bookkeeping Firm
Fear is the number one reason that stops bookkeeping business owners from charging what they’re worth. And even if they start increasing their prices, there’s the fear at the back of their minds that it’ll mean less clients. If you feel that fear, don’t give in to it. The fact is that even with the price increase, clients will still say yes to your offers. Just remember that the key is in the way you present it. Clients need to see that they will get more value out of your services compared to how much you charge them for it. When you can do that, they’ll happily pay you what you’re worth. That’s the power of value pricing.
If you'd like to learn more about mastering your sales process, go ahead and:
- Get our free book - Click here
- Join our Private Facebook Group - Click here
- Sign up for our Free Resources - Click here
- Buy our 7 Secrets Program - Click here
- Book a Discovery Call with Jeff - Click here
