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The Easiest Way to Increase Revenue in Your Accounting Business

The Easiest Way to Increase Revenue in Your Accounting Business

Working with documentsThe easiest way to increase revenue in your firm is to raise prices. That’s a quick short-term answer that can work year after year, except if you are still billing by the hour. In the long term, hourly billers have a more systemic problem to solve as compliance work becomes more and more automated.

Many in our profession say that value pricing is the answer, but I don’t believe it works well with all clients and all services. Ron Baker is a well-respected genius who has led the charge to value pricing for decades among large accounting firms, and his beliefs are that you should not only throw out timesheets, but you should also throw out the clients who don’t accept your value-based prices.

Most of us in the smaller firms simply can’t afford that extreme view. A few of you have numerous micro-business clients (under $1MM in revenue), and value pricing can be harder in that market (and even in the $3 to $20MM market) than in the large firms where you have scale and leverage on your side.

Rather than jump off a cliff, my view is to take one step at a time as you are comfortable. Baby steps if you have to. But first, let’s tease apart where most people are getting stuck in pricing their accounting and tax services.

Step 1. Don’t let anyone dictate how you should price.

Hourly billing and value pricing are two pricing options, each at opposite ends of the pricing spectrum. I really don’t know why more thought leaders aren’t steering you to the middle. I like the middle. I am financially conservative like that. I think most accountants like the middle of the road. Even if you want to go to the extreme, staying in the middle for a while will reduce your risk and build your skills on your way there.

Step 2. Learn about all the pricing options in and outside our industry.

Even if you are happy with your pricing, it just makes sense to get some training on pricing if you never have. At the least, you’ll be able to better understand your clients’ many different business models and pricing options. And you will be able to feel like you’ve done your due diligence with regard to your own firm’s pricing choices.

If you feel pressured about how you are pricing or feel like you are missing out on something, then education is the way to resolve those feelings.

Download our free guide here to learn 37 places to find new clients and boost your accounting revenue

Step 3. Realize it’s not an all-or-none choice.

When making a pricing choice, you don’t have to throw the baby out with the bathwater. This is where many accountants are getting stuck:

Fact 1: Value pricing is a no-brainer when it comes to pricing high-ROI engagements, once you know the formula. People are getting stuck value-pricing low-ROI compliance work as well as lower ROI engagements.

Fact 2: The value pricing process is a little bit different depending on whether you are working in a large firm or small firm. Value pricing implementation is also different depending on what size business client you are working with.

Fact 3: The process to value-price recurring monthly work differs from the process to value-price one-time projects, and when there is both, often when a client first comes to you, you need to separate them when you work out the price.

Fact 4: The very definition of value pricing varies among thought leaders, confusing practitioners even more than they already are.

Fact 5: In many cases, true academic value pricing requires a higher level of sales and negotiation skills than most accountants possess.

Fact 6: Value pricing is the most profitable of all pricing methods (or is it?). In theory, this is true, but in practice, you need to account for lost work, increased selling cycle, and extensive training. By the end of all that, package or fixed pricing with a high margin component might be your better bet.

Step 4. Make a smart decision about your pricing.

It’s your firm. If you want to keep hourly billing, it’s your choice. IF you want to value price and throw out your timesheets, it’s your company. I believe most accountants will implement something in the middle once they understand the options: fixed pricing, package pricing with a value component, or something else.

And that’s why we’re offering our pricing course starting November 9. We’ve found that a boost in pricing, selling, proposal, and/or estimating skills is what really makes a difference when increasing your revenue in your accounting business.

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