Gross Profit in a Professional Services Firm: Opening a Dialogue

Plus specific ways to improve in services, marketing, sales, delivery and support.

By August J. Aquila
Price It Right

Accounting firms focus on top-line revenue or net profit. But are they focusing on what really matters?

MORE: Tomorrow’s Leader in 9 Bullet Points | CHECKLIST: 18 Essential Steps to Effective Billing | How to Get Partners to Accept a New Pricing Philosophy | 12 Pricing Factors Beyond Cost | 13 Questions about Providing Value | How to Shift from Production to Marketing Orientation
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Profitable businesses involve more than just selling more products and services to increase revenues. There is an old joke in the retail business: A salesperson tells the manager that they are losing $1 on every shirt they sell. The manager says, “Don’t worry, we can make it up in volume.”
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Client Centricity Leads to Profitability

Man's fist with "thumbs up" crashing through paper wall; smiley face and gold crown on thumbThis is a job for your line partners, not your marketing department.

By August J. Aquila
Price It Right

As one who has been on the inside of accounting firms as a partner and marketing director trying to implement such concepts as client centricity, I can honestly say that most marketing and management concepts are easier said than done.

MORE: Tomorrow’s Leader in 9 Bullet Points | CHECKLIST: 18 Essential Steps to Effective Billing | How to Get Partners to Accept a New Pricing Philosophy | 12 Pricing Factors Beyond Cost | How Utility and Value Affect Pricing | Understanding the Product Pricing Life Cycle | 4 Ways a Production Orientation Can Harm a Firm
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When it comes to clients, many partners think they know what their clients really want, but in reality they scarcely do. In short, most client-centric service strategies produce neither the “wow” factor nor the profits.
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Tomorrow’s Leader in 9 Bullet Points

Number 9 created by gaps between many small green plastic 9'sDon't have them all? Pick one and get started.

By August J. Aquila
Price It Right

Everything the firm does from this moment on flows from this decision, including the firm’s strategy, reputation, the ability to attract critical talent and how well it will execute its plans.

MORE: CHECKLIST: 18 Essential Steps to Effective Billing | 6 Steps to Making Your New Pricing Happen | Preparing to Change Pricing Philosophy | Ethical Issues in Pricing | How Utility and Value Affect Pricing | Understanding the Product Pricing Life Cycle | 4 Ways a Production Orientation Can Harm a Firm
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Selecting the strongest rainmaker or the longest tenured partner, no matter how well liked, can quickly send the firm in the wrong direction if the candidate is underprepared or an inadequate leader.
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SURVEY: Tiered Partnerships? It’s Happening

Businessman ascending three stepsTransition, staff shortages remain issues.

By August Aquila
Rosenberg MAP Survey

First, while the merger frenzy continued in 2016, firms were becoming more selective in the type of firms they were acquiring. Over the last several years, firms were acquiring for the sake of more volume.

MORE FROM THE MAP SURVEY: Extending Retirement Turns off Future Leaders | Firms Struggle to Retain Clients, Key Players | Staffing and Succession Still Rocking Firms | Will Staffing Challenges Change the Definition of Partner?
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2016 was different. Firms didn’t want to just add more volume, they were looking for specific niches that would strengthen their existing practices. Also, it became more evident that firms were struggling with the fact that they had acquired a lot of problems.
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CHECKLIST: 18 Essential Steps to Effective Billing

Woman examining documentHow to get paid what you're worth. On time. Every time.

By August J. Aquila
Price It Right

Is the phrase "effective billing philosophy" an oxymoron? I’m beginning to believe that it is.

MORE: 6 Steps to Making Your New Pricing Happen | 5 Ways to Get Clients to Accept a New Pricing Philosophy | 11 Alternative Pricing Methods | Applying Cobb’s Value Curve to Your Firm | The Four Types of Competition | Marketing and the 5 P’s
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Analysis of the results of current billing and collection procedures and policies reveals that, for the most part, they aren’t working very well. The fact is, they have not worked well for decades.
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6 Steps to Making Your New Pricing Happen

The number 6 made from dollar stacksCreate bundles for each service line.

By August J. Aquila
Price It Right

This is where the rubber meets the road. The future of pricing professional services is making the move to value pricing.

MORE: 5 Ways to Get Clients to Accept a New Pricing Philosophy | How to Get Partners to Accept a New Pricing Philosophy | 12 Pricing Factors Beyond Cost | 13 Questions about Providing Value | How Demand Affects Pricing | How to Shift from Production to Marketing Orientation | How Traditional Fee Methods Hurt Firms
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While you may want to make it an option for your firm, I strongly suggest that you make it the option. I know from experience that value pricing is better than billing for your time.
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5 Ways to Get Clients to Accept a New Pricing Philosophy

Don't just anticipate questions, plan for them.

By August J. Aquila
Price It Right

Once your partners are sold on a new pricing philosophy, you will need to communicate it to your clients.

MORE: How to Get Partners to Accept a New Pricing Philosophy | Preparing to Change Pricing Philosophy | Ethical Issues in Pricing | How Utility and Value Affect Pricing | Understanding the Product Pricing Life Cycle
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There are five ways to get clients to understand and accept the new pricing methods. Each of these methods is discussed below.
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How to Get Partners to Accept a New Pricing Philosophy

Businessman putting a card with text "Don't resist change, embrace it" in suit pocket5 common objections ... and 5 reasons to change. BONUS: an 11-point fee audit.

By August J. Aquila
Price It Right

Before you announce new pricing policies to your clients, it is critical that you and all the partners in your firm embrace the new pricing philosophy. The entire process begins with the following:

MORE: Preparing to Change Pricing Philosophy | 11 Alternative Pricing Methods | Applying Cobb’s Value Curve to Your Firm | The Four Types of Competition | Marketing and the 5 P’s | Why Choose a Marketplace Orientation?
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  1. The firm's willingness to make some changes
  2. An analysis of existing engagements and the economic impact that a different pricing strategy will have on the firm
  3. A review of how the firm is currently delivering and producing its services
  4. The firm’s overall relationships and communication style with its clients

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Preparing to Change Pricing Philosophy

Businesspeople chatting around a water cooler5 factors to consider.

By August J. Aquila
Price It Right

Once you have decided to adopt an alternative pricing philosophy, what do you do next?

MORE: 11 Alternative Pricing Methods | 12 Pricing Factors Beyond Cost | 13 Questions about Providing Value | How Demand Affects Pricing | How to Shift from Production to Marketing Orientation | How Traditional Fee Methods Hurt Firms
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Changing your firm’s pricing philosophy is really a three-step process. First, you need to consider several factors before suggesting a change. Second, you need to get your partners to agree that it is a good idea, and third, you need to educate your clients so that they accept and understand the new approach.
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11 Alternative Pricing Methods

Woman in officeWhen to use each, plus the marketing and operational perspective.

By August J. Aquila
Price It Right

There are many ways to price professional services.

MORE: 12 Pricing Factors Beyond Cost | Ethical Issues in Pricing | How Utility and Value Affect Pricing | Understanding the Product Pricing Life Cycle | 4 Ways a Production Orientation Can Harm a Firm | Price to Get the Maximum Fee | 7 Issues in Partner Retirement Planning | Is It Time for a Partner Compensation Checkup?
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Alternative pricing methods in the legal profession have received much more attention than in the accounting profession. In fact, entire publications have been issued by the American Bar Association (ABA) on this particular topic.
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12 Pricing Factors Beyond Cost

Man with net chasing winged moneyCost-plus is a starting point, not the end point.

By August J. Aquila
Price It Right

Accountants face only two major restrictions in determining their fees – the restriction against contingency fees under certain circumstances and the taking of commissions or referral fees.

MORE: Ethical Issues in Pricing | Applying Cobb’s Value Curve to Your Firm | The Four Types of Competition | Marketing and the 5 P’s | Why Choose a Marketplace Orientation? | Why Value Pricing? | Solving Underperforming or Dysfunctional Partners | The 3 Types of Partners You Need
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We have also seen that for the most part, accountants bill their time based on a cost-plus method.
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