5 Different Approaches to Pricing Your Accounting Services
When pricing your accounting services, you should be intentional and strategic. Effective pricing means the difference between robust growth and barely making ends meet; sometimes, your prices are the final speed bump that could cause a prospective client to choose another provider.
If you evaluate pricing strategies for your company, you must consider various structures and see which one suits your needs. Here are common pricing strategies and the costs and benefits of utilizing each.
Pricing strategy 1: cost-plus pricing
When you apply cost-plus pricing, you determine industry-standard fees and add a percentage to the amount, enabling you to earn a profit. One advantage of this approach is that it is easy to implement. Clients can easily understand how much they must pay for certain services. What's more, they let you earn even if you have variable expenses.
A downside is that this approach disregards competitors, whose prices can affect people's reception of yours. Cost-plus pricing is also a broad approach; it doesn't give you as much value as you could get from performing these services. Consulting a process expert will help you determine if this is the best option for your business.
Pricing strategy 2: flat-fee
With flat-fee pricing, you set a price at the start of the contract and invoice the client the exact amount, no matter how much time you devote to the project. This strategy is best for rote tasks like preparing simple tax returns, and like cost-plus pricing, it is easy for clients to grasp.
However, it is not practical for complex projects that require long hours. Also, flat-fee pricing does not account for incidental tasks that might come up.
Pricing strategy 3: competition-based
Pricing your services to be in step with others in your field is an excellent way to prevent yourself from losing out to the competition. Becoming aware of your competitors' prices allows for flexibility in the way you do your business.
A disadvantage with this approach is that prices could be too low, especially if you are a specialist or an expert. Competition-based pricing also prevents you from being proactive about business growth.
Pricing strategy 4: time-based
Often, time-based pricing is the default for accounting firms. Billing clients for every hour spent on a project is a simple process, especially if you have bookkeeping software.
However, it could lead to 'surprise bills' for your clients, which could mean discussions or clarifications about the services rendered. Seek help from specialists on business guidance; they can guide you in creating a structure that clearly shows how many hours you worked on a project and what tools you used to achieve results.
Pricing strategy 5: value-based
With value-based pricing, you price your services according to their perceived value. This approach is less about charging a lot and more about setting prices based on market insights. When you understand your clients and the type of work you're best at, you can implement value-based pricing quite effectively; it puts a dollar amount on your differentiating factors.
The downside to this approach is that it takes time to implement. Not only do you need a lot of information on the prices for your services, but you also need to know clients willing to pay a premium for these. You cannot get that if you're only starting in the industry. Seek help from an accounting consultant to help you refine your value-based pricing model.
There are different ways you can price your services, and choosing the best structure comes down to your offerings and the types of clients you serve. When in doubt, you could always seek advice from a consultant to help you develop a scheme that works for everyone involved.
Stand out in your industry when you consult with Quasar Cowboy. We are accountant advisors in Palm Springs, CA, helping business owners identify and amplify their unique value. Schedule a meeting with us today for more information!