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Seven steps to setting your price.

By Jody Padar
Radical Pricing – By The Radical CPA

How much would you pay for a bottle of water in the checkout line of a grocery store? Maybe $2 or $3, right? You know it costs more per unit than buying a case of water, but at that moment it’s worth it even though it’s the same bottle of water. Now, let’s assume you just made the long trek back to your hotel room in Las Vegas. They have the same bottle of water sitting there for $10. You’re thirsty and don’t want to walk to find a store, so you pay $10 for that bottle conveniently located in your room. The water isn’t different, but the value at that moment in time is subjective.

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When we think about price, we really need to think about worth. What actually are you bringing to the table? Lots of training. Many years of experience. Vision into similar businesses. It took you years to get here; don’t sell an answer to a question the client asks for the three minutes it took to answer.
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Mechanics do it and so can you.

By Jody Padar
Radical Pricing – By The Radical CPA

Change orders are the result of a well-scoped process. They occur when a client adds a service not included in their original engagement or when a manager or partner requests a service be scoped and priced separately. The client decides whether or not to proceed with the change.

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The process of a change order is similar to taking your car to the mechanic for an oil change. During a diagnostic, they find you need a tire alignment as well. The alignment is not included in the services you bought, but you’re curious to know how much it would cost. Depending on the price, you’ll add it to the original quote, or you won’t.

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Don’t let a partner do this alone.

By Jody Padar
Radical Pricing – By The Radical CPA

Partners, managers and accounting professionals must all understand scope to deliver the right amount of work for the engagement.

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Everyone needs to be aligned. Everyone needs to know what the customer ordered, how to deliver it and where the work ends.

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The customer is not always right.

By Jody Padar
Radical Pricing – By The Radical CPA

There are few ways to sink an accounting firm faster than winning bad clients. They will rob your profitability, steal your sanity and cause havoc among your staff and other client relationships.

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Ask yourself these questions and be prepared to walk away if you don’t get the right answers:

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Maximize benefits for both you and the client.

By Jody Padar
Radical Pricing – By The Radical CPA

Accurate pricing relies heavily on thorough scoping to measure the engagement, and good scoping defines the deliverables, sets the client’s expectations and calculates the labor it will take to get the job done.

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With that said, here’s how your scoping process helps you determine the ultimate price:

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Everyone must know exactly what does and does NOT fall within the lines of scoped services.

By Jody Padar
Radical Pricing – By The Radical CPA

There’s a time to increase scope and a time to let it slide. Let’s explore these two options.

It’s professional responsibility to inform a client when a request is out of scope. In this instance, you have two options: either make it a separate engagement or include it in the existing service package. It’s important to have everyone on the same page about what is within scope and what falls outside of it.

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It would be best if you always built into your pricing agreements a 20 percent buffer to protect you against pricing mistakes. This doesn’t mean you should do work outside the scope for free, but if a client asks for a service not included, you could decide to let it go if the amount is immaterial.

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Five issues to consider.

By Jody Padar
Radical Pricing – By The Radical CPA

What is the lowest monthly fee paid by any of your clients? You probably don’t want to bring on any new clients at a lower fee, so use this as your new business baseline. No one enters your firm without paying this baseline monthly service fee.

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However, the question remains whether the client will be billed on a fixed-price or value-priced basis. Here are five issues to consider as you make this decision:

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Seventeen things to ask when scoping.

By Jody Padar
Radical Pricing – By The Radical CPA

Using subjective questions helps you assess what the prospective client considers valuable. This means understanding which services and solutions they see as having the biggest impact on their financial health. It also gives you insight into where they are hurting most in their business.

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This process is time-consuming because it sets the stage for your relationship moving forward. Take your time and collect all the data, documentation and subjective input so you can gain a holistic view of the customer’s current situation. Let’s take a look at some of the questions you can ask and why they are important.

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It’s all about risk.

By Jody Padar
Radical Pricing – By The Radical CPA

Scoping is a time commitment, so know that the client is worth the commitment and they have the revenue to back it. Start by setting a minimum price point you will charge for the assessment process. If the client falls below your threshold price point, it doesn’t mean you’re not going to scope them, it just means the process will be less complex and can probably be done within an hour.

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For smaller clients, it helps the process if they arrive at the assessment with all the necessary information. You can look at their QuickBooks data and tax returns to get a strong sense of what they need and how long it will take to deliver. Scoping a small, straightforward client will become second nature with time. But be careful about being too casual when scoping smaller clients. If you miscalculate, you are still opening your firm up to risk.

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It’s all about risk.

By Jody Padar
Radical Pricing – By The Radical CPA

Scoping is a time commitment, so know that the client is worth the commitment and they have the revenue to back it. Start by setting a minimum price point you will charge for the assessment process. If the client falls below your threshold price point, it doesn’t mean you’re not going to scope them, it just means the process will be less complex and can probably be done within an hour.

MORE by Jody Padar
Exclusively for PRO Members. Log in here or upgrade to PRO today.

For smaller clients, it helps the process if they arrive at the assessment with all the necessary information. You can look at their QuickBooks data and tax returns to get a strong sense of what they need and how long it will take to deliver. Scoping a small, straightforward client will become second nature with time. But be careful about being too casual when scoping smaller clients. If you miscalculate, you are still opening your firm up to risk.

READ MORE →