Leaving Money on the Table
The 4 hour work week is a catchy book title. But, that’s not the reality for most accounting professionals. They’d happily trade in a sixty hour work week for a forty hour week – especially during tax season. Fortunately, a solution exists.
An hourly rate means working more to earn more. With that pricing strategy, you gradually give up family time, social time with friends or workouts at the gym. Keep reading if you’re tired of sacrificing your personal life and leaving money on the table.
Before we dig in. let’s define cost, price and value.
1. Cost is the amount required for you to provide a specific service. Lower rates mean lower profit. When you sell any of your accounting services below your profit margin, you lose.
2. Price is the amount of money that changes hands between a buyer and seller.
3. Value represents the highest dollar amount that a client’s willing to pay for your service.
Let’s move onto the pricing pitfalls where you end up leaving money on the table.
1. Hourly pricing. The billable hour means you trade your time for money. Although an hourly rate is the easiest to implement, you leave lots of money on the table since it overlooks your expertise.
Sue’s ready to sell her company and consulted with Mike about her exit strategy. She figured $1.5 million was a fair price. Mike’s valuation estimated her company was worth $8 million. She finally sold the company for $6 million.
Because Mike charged Sue for his time, he earned $2000. Based on his advice, she made an additional $3.5 million from the sale. His advice was significantly greater than his $2000 invoice. Would you pay $100,000 to consult with an expert that could lead to an additional $1 million in profit?
2. Competing on price. Doing things differently than others requires courage. Accounting professionals often claim their clients won’t pay higher fees. Especially, if no one else charges that much.
Competitive pricing is a poor pricing strategy. Price competitions train your clients to focus on price and overlook value. Read full post. #getpaidwhatyoureworth Click To Tweet
Competitive pricing is a poor pricing strategy. Although you win new clients, your profits decline. In fact, price competition trains your clients to focus on price and overlook value.
3. Give away work for free. Accounting professionals frequently offer a complimentary consultation. Initial consultations primarily answer one question. Are you and this potential client a fit for working together?
Many consultations mistakenly turn into free pick-your-brain sessions. Because you want to help, you immediately get to work. Well, you haven’t been hired for the job yet. Then you end up confused when someone you thought you connected with signs on with a different firm.
4. Not enough credentials. Too many accounting professionals, whether new or seasoned, downplay their credentials.
When Diane left her 9 to 5 bookkeeping job, she charged $50 / hour for her services. She casually mentioned teaching as an adjunct professor for the local college and receiving an award for her work.
Well, she currently works 60-70 hour weeks. When I asked how many years she’s been a bookkeeper, Diane proudly said 25 years. Diane’s pricing reflects how long she’s been a business owner. Her rates overlook the years she’s devoted to bookkeeping.
5. Negotiate on price. Naturally, your clients want the highest value for the best price. Confidence dwindles once you hear an objection about your rates being too expensive. You then cave in on price.
Your knee jerk response lowers your value. Decide to stand firm on your price to stop leaving money on the table.
If someone doesn’t want to pay the price you’re asking, then negotiate features. You can remove some options to adjust the price.Experienced negotiators set a “walk-away price” beforehand. Like poker, sometimes you need to decide when to fold your hand, stand up and walk away from the table to avoid losing your shirt. Read full post. #getpaidwhatyoureworth Click To Tweet
Experienced negotiators set a “walk-away price” beforehand. Like poker, sometimes you need to decide when to fold your hand, stand up and walk away from the table to avoid losing your shirt. Otherwise, you may bargain away all your profits. Or, lose money in order to close a deal while ignoring the signals to stop.
6. Don’t want to brag. No one likes a person who loudly brags about her greatness. But, potential clients need to figure out why they ought to work with you instead of someone else.
If you don’t answer those questions, then they’re likely to move on. Bragging isn’t very client attractive. However, potential clients need information. Consider a variety of ways you can educate them.
7. Unsure of the problem you solve. Most accounting professionals get this wrong. I bet the problem you think you solve differs from the problem your clients want you to solve. Connect your solution to their problem. Then you gain recognition as a specialist and no longer need to compete for business.
Now you know the 7 pricing pitfalls. Which one stood out for you?
Start with One
Decide to finally plug up your money leaks. Start with one. Then, consistently make adjustments as new ones arise.
Remember to constantly lead with value. Connect with your value, value price your services and offer value conversations to potential clients. By doing this, you join the growing ranks of value based accounting professionals. It’s an advanced move which potentially increases your income without working additional hours.
Are you tired of leaving money on the table? Discover how to increase your revenues and attract clients who happily pay your fees. Right NOW claim your FREE RESOURCE to earn more without working more.