Is your pricing strategy working?
Who knows why something finally clicks? Timing, experience, messaging – all combine for the “aha” moment. The moment you “get it” is a beautiful experience. Pricing strategy was one of those illuminating experiences.
How does your worth affect your pricing? Most accounting professionals follow the industry standard pricing strategy. Whether you’re a bookkeeper, enrolled agent or CPA this applies to you.
Competitive pricing trades dollars for hours
First, you figure out the range. Next, you develop your pricing structure within those margins. The traditional price strategy has you research the high and low of your competitors. Then you choose your prices. This is a good starting place when you solely base your pricing on dollars for hours. Competitive pricing has a downside. Eventually you bump up against an upper limit problem – which affects your earnings.Pricing methods which rely on a dollar per hour rate limit your income potential. Read full post to discover how to earn more for your #accounting services without working more. #getpaidwhatyoureworth Click To Tweet
Here’s why pricing methods which rely on an hourly rate limit your income potential:
- Time. The number of hours you’re capable of working are finite
- Experience. More experienced professionals arrive at a solution faster than newbies. When charging by the hour, you’re actually paid less than a newbie who may be slower and less experienced than you.
- Devalues. This devalues the long lasting impact which your services offer.
- Confidence. Accounting professionals with lower self worth keep their prices low.
- Illusion. Your beliefs influence pricing strategies.
The traditional pricing strategy doesn’t reflect your value
During a strategic planning session with my first business coach, I learned about these 4 types of value.
- Ease. Life is complicated enough. My clients seek solutions to their problems, AND they want it to be easy.
- Fast. Our society craves immediacy. Expertise is developed from years of experience and wisdom. You possess the skills to resolve an issue faster, and with fewer mistakes, than a newbie.
- Saves money. Consider the time, money and effort your client has already spent trying to resolve bookkeeping and accounting issues on their own.
- Makes money. This has two aspects. First, how does your service help your clients to generate income? And, hiring you frees them up to focus on other activities.
These are four ways your service adds value. Does offering all four have more value than one? Not necessarily.
Hierarchy for service delivery
My understanding of value based pricing deepened when another mentor outlined 4 primary delivery models.
- Theory. This is primarily academia. Teachers in academia emphasize theory.
- Tactical. Most accounting professionals fall into this category where they teach the steps to manage the financials.
- Transformational. This delivers value beyond the obvious because it has the potential to be life changing for your clients. Agents of change and industry leaders emphasize transformation to help their clients advance.
- Transcendence. Visionaries who are on a mission to change the world fall into this category. They aspire to leave a legacy. You’ll notice how their mission is deeply connected to their purpose.
Where are you? What are your aspirations?
An advanced pricing move which recognizes your value
The best way to move from one category to the next is to spend time with people who already operate at that level. Notice how people who serve at a higher level differ from you. Observe their actions, beliefs and focus. Decide which part of their model appeals to you. Then choose one business level strategy which you are ready to adopt.
The Walmart and Neiman Marcus price and value comparison
Now let’s move onto the third insight I gained regarding value and pricing. With pricing, customer service and quality, you can choose two out of three. Decide whether your price strategy positions you as the Walmart or the Neiman Marcus in your industry. The low cost leader, seeking to serve everyone, is unable to offer the same quality as the high end specialty store.Between pricing, customer service and quality, you can choose two out of three. Decide whether your #price strategy positions your #accounting firm as the Walmart or the Neiman Marcus in the profession. Read full post.… Click To Tweet
I teach my clients not to start off as the Walmart low cost leader with competition based pricing. This model trains clients to associate you with low cost products. It’s similar to an actor who gets type cast for comedies. Switching to premium pricing becomes difficult. It’ll be difficult convincing someone who equates you with Walmart pricing that you’re now Neiman Marcus quality.
I’ve noticed accounting professionals who give away their service or ask people to pay what they can. I wonder how clients value their service, when they don’t value their own service. Can they really manage their clients financials when they’re uncomfortable discussing the rates of their own service?
Riches are in the niches
Value based pricing is the Cadillac of pricing models. As the name implies, this pricing strategy emphasizes value. Value, however, is determined by the buyer. Research to develop extreme clarity about your ideal client will be necessary.
When done correctly, value based pricing separates you from the competition. Pairing value and price highlights the transformation instead of the tactical steps involved. Emphasizing the transformation helps to answer a potential client’s primary question which is “Can you help solve my problem?” Greater value is placed on successfully resolving their issue than what apps or software you use to get the job done.
Follow these recommendations for your accounting practice to be successful, and grow while keeping your passion alive. Are you tired of doing work for free because you don’t know how to charge for it? Discover how to get paid what you are worth and attract clients who understand your value. Right NOW claim your FREE RESOURCE to create value based pricing.