How to Set a Profitable Price Every Time

The right clients will be willing to pay fair prices.

By Gabrielle Fontaine
AddviserPlus

Whenever in negotiations with a potential client, do you know when to walk away, or do you feel forced to lower your price just to win the sale?

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Especially when attempting to use flat-fee pricing, many accounting professionals get caught up in doing anything to win new clients. That's a mistake.

The truth is, if a potential client isn’t willing to pay a fair price that gets your firm’s needs met too, it’s a losing proposition for both you and the client in the long run.

Of course, at the other end of the spectrum, there are some so-called thought leaders who are attempting to teach accounting professionals to use pricing methods in a way that is solely focused on sucking as much money as possible out the coffers of your clients. They tell us we deserve to make as much money as we can get a client to pay us. There’s little talk about providing true value to the clients in exchange for those top-level prices.

From where I sit, isn’t that approaching a used-car-salesman mentality? Would you want to work with an accounting firm whose sole focus is to get you to pay them as much as possible?

The reason used car sales tactics have such a bad rap is because they can involve duping the customer with empty promises. That might work for selling cars because that type of sale is made only once every few or more years. Applying these strategies to professional business services that involve a close ongoing relationship with clients is a shortsighted path that will do more damage than good for all concerned.

In either scenario, whether attempting to gouge the client or the client is trying to take advantage of you with lowball pressure, it’s a red flag that indicates it’s probably time to walk away.

The point is, the right clients will be agreeable to pay a fair price, commensurate with the services you propose to provide them. A fair price is one where both you and the client are happy. Period. That’s what I call win-win pricing. A fair exchange of value on both sides needs to be part of the equation, always. Otherwise, it’s a mismatch and the client will, sooner rather than later, be lost.

So how do you find a win-win price?

There are many different pricing strategies. The ones that fit the win-win mindset ensure that you will set a profitable price every time. Various flat-fee methods usually work well, and value pricing, done properly, works even better. The simplest general guideline comes from my business partner, Martin Bissett. He said it comes down to three main numbers …

  1. The ideal price – that is, the price you want that’s fair compensation or remuneration for the impact your services will make on the client’s business and well-being
  2. The walkaway price – that is, what you really don't want to do the work for any less than to meet your needs
  3. The cost price – that is, what the work is actually going to cost you to perform in the first place just to break even

if you get involved in any kind of negotiation with a prospective client, your final price should sit somewhere between the ideal price (the one you really want) and the walkaway price (the lowest price at which you can profitably do the work).

Simple, right? It really doesn’t have to be more complicated than that!

So, the next time you find yourself speaking with a prospective client and you’re faced with the task of setting your price for the needed services, consider these three price levels. Start your pricing conversation with the ideal price. Check it against what your client’s perception is of the value you will bring to her business. Close the deal either at that price or somewhere above your walkaway price.

If it turns out that there’s a mismatch and the client doesn’t see the value in what you have to offer, you still win! By walking away you’ve saved both yourself and the client from a lose-lose situation.

So use this and you will win every time and have the confidence that you’re pricing profitably every time.

 

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