PRICING, FEES & BILLING RATES

Ed Kless: Clients Don’t Want Outputs. They Want Outcomes

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The Disruptors: Too busy? Raise your prices.

 

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The Disruptors
With Liz Farr for CPA Trendlines

What do clients – or, as Ed Kless prefers, customers – want from their accountants? It’s not the tax return or the financial statement but the outcome for the customer, which is most often peace of mind.

To remain relevant in disruptions like online tax preparation and automated bookkeeping tech firms like Pilot, accountants need to consider other ancillary services they can provide above and beyond those basic services.

MORE:  Seth Fineberg: Your Classic Business Model Won’t Allow Growth | Hector Garcia: Success Strategies of a Quickbooks YouTube Superstar | Blake Oliver: Why Tax Work Yearns To Be Free| Private Equity Explodes in U.K. | Brannon Poe: The Status Quo Must Go  | Accounting Nerds, Unlock Your Super Powers  | Disruptor: Jason Statts Shakes Up the Status Quo | Think Small to Think Big with Matt Wilkinson | When Financial Statements Go Extinct with Corey Schmidt | Can Geraldine Carter Save Accountants from Themselves? | Re-Inventing Accounting with Tyler Anderson

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“When you bill by the hour, when you have to measure your time, and when you tell the customer, ‘Pay attention to my efficiency because that’s what I’m going to charge you,’ then they start looking at your efficiency instead of your effectiveness, which is the wrong thing to be looking at,” Kless explained.

Additionally, Kless said CPAs who are “too busy” need to raise their fees.

He said, “One of the mantras in pricing is innovating for growth, pricing for profit. When an organization wants to grow, the focus has to be on innovating, creating new things to offer, not necessarily what we used to be called rainmaking, which is getting more customers.”

Kless maintains that accountants or CPAs should strive to be the first person called, no matter what the customer wants, whether it’s Super Bowl tickets or a recommendation for the best medical team in an emergency. But experimenting with adding additional services or converting to a subscription-based business model will not be possible for firms that remain wedded to the timesheet, which, Kess said, quoting Ron Baker, is cancer of the accounting profession.

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Get Clients to Accept Your New Pricing Philosophy

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Hand moving triangle along beam to indicate balance between price and valueA client who does not contribute to your bottom line is not a client.

By August J. Aquila

Once your partners are sold on the new pricing philosophy, you will need to communicate it to your clients. There are five ways to get clients to understand and accept the new pricing methods. Each of these methods is discussed below.

MORE: Getting Partners to Accept a New Pricing Philosophy | When to Use 11 Alternative Pricing Methods | Make the Value Curve Work for You | How to Leverage Demand In Your Pricing | Make the Most of Your Marketing Mix
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Believe that clients will accept a new pricing method: If you don’t believe it, you can be sure that your clients won’t either. It is not unusual for physicians, stockbrokers and attorneys to change billing methods. Actually, most of your clients will understand what you are doing if you clearly communicate with them. There is a truism that good client relationships are based on trust. The clients trust that you will do the right thing for them. If they lack this trust, no matter what pricing method you employ, you will have problems with your client.
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Getting Partners to Accept a New Pricing Philosophy

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Post with two signs, "same" and "change"They have to be on board before clients.

By August J. Aquila

Once you have decided to adopt an alternative pricing philosophy, what do you do next? Changing your firm’s pricing philosophy is really a three-step process.

MORE: When to Use 11 Alternative Pricing Methods | 12 Subjective Factors for Pricing Your Next Engagement | How Utility and Value Affect Pricing | The Four Phases of Service Life | Marketing Orientation Is What Firms Need
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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. The steps are not easy, but they are possible. And, remember, change does not occur overnight.

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When to Use 11 Alternative Pricing Methods

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Businessman and tablet with the word "pricing" above.Plus why.

By August J. Aquila

There are many ways to price professional services. 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 on this particular topic.

MORE: 12 Subjective Factors for Pricing Your Next Engagement | Ethics Question: Commissions and Contingencies | How Competitors Drive Pricing | What We Know about Pricing Strategies | When Hourly Billing Hurts Profits
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I am aware of at least 14 different approaches to billing that attorneys can use under different sets of circumstances. Obviously, each method has advantages and disadvantages as well as marketing and operational implications. I maintain that several of these methods can be used by accountants and consultants in accounting firms when pricing their services.
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12 Subjective Factors for Pricing Your Next Engagement

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Price targetStandard rates too often leave you short.

By August J. Aquila

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. We have also seen that for the most part, accountants bill their time based on a cost-plus method.

MORE: Ethics Question: Commissions and Contingencies | Make the Value Curve Work for You | How to Leverage Demand In Your Pricing | Make the Most of Your Marketing Mix
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We don’t have to go far to find a source that suggests “that no business can survive and grow in the marketplace unless it is profit-oriented and motivated,” and “time charges at standard rates should only be the starting point for determining the amount to be billed. The real criteria is the value of the service to clients.” The source for these words of wisdom is none other than the AICPA Management of an Accounting Practice Handbook. The Handbook goes on to say that “standard rates should not represent a maximum that can be billed for services; rather they should represent a minimum.”
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Ethics Question: Commissions and Contingencies

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Statue of scales of justiceFollow the standards.

By August J. Aquila

In the old days you could go into a shoe store and purchase sneakers or gym shoes. Nowadays, there are tennis shoes, running shoes, cross trainers, aerobic shoes, basketball shoes, soccer shoes and the list goes on and on.

MORE: Make the Value Curve Work for You | How Utility and Value Affect Pricing | The Four Phases of Service Life | Marketing Orientation Is What Firms Need
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Perhaps the billable hour paradigm soon will go the way of the gym shoe. Accountants need to realize that in pricing their services, one pricing method will no longer do. As with athletic shoes, accounting and consulting services can be priced in many different ways.
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Make the Value Curve Work for You

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Older businessman leaning back thinkingDoes your position match client perception?

By August J. Aquila

There is a completely different way of looking at value and it is tied into the type of accounting or consulting work that is available in any given market and the type of accounting or consulting work that your firm provides. Thirty-plus years ago William C. Cobb wrote “The Value Curve and the Folly of Billing-Rate Pricing,” providing a great deal of insight into the concept of pricing and value. Many of the ideas that follow are based on Cobb’s article.

MORE: How Competitors Drive Pricing | How to Leverage Demand In Your Pricing | The Four Phases of Service Life | What We Know about Pricing Strategies | Make the Most of Your Marketing Mix | Marketing Orientation Is What Firms Need | When Hourly Billing Hurts Profits
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In discussing legal services, Cobb notes that sophisticated clients do not tie benefits to hours. Rather, there are certain types of services that have a significant impact on the client’s business. The key words here are “sophisticated” and “impact.”
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How to Fire a Client

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Big businessman foot on spring kicking three businesspeopleBONUS: Sample Client Disengagement Letter.

By Sandi Leyva and Michelle Long

How many clients have you fired?

MORE SMALL FIRM GROWTH STRATEGIES: What to Do When a Client Doesn’t Pay | The Dreaded ‘Quick Question’ | How to Handle Referrals – And How Not To | Why Clients Need Dashboards | Five Ways to Raise Your Prices | Your Existing Clients Are Your Best Leads | Need More Business? Focus on Referrals

Let’s talk about firing a client because sometimes you do need to fire your client. Maybe they’re difficult to work with, or a guy is belligerent and loud and yells, and you don’t want to work for him. Maybe there are ethical issues.
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