PRICING, FEES & BILLING RATES

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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How Utility and Value Affect Pricing

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Hand moving triangle along beam to indicate balance between price and valueEight kinds of utility and four perceptions of value.

By August J. Aquila

If indeed we believe the phrase “perception is reality,” then it is the client’s perception that is the only reality. Ultimately, only a client can determine the value of your service, that is, the fee he or she is willing to pay. If the client perceives that he or she has received a benefit there will be some perceived value attached to the service.

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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Consciously or unconsciously, the client’s determination of the correct fee for a service is related to two concepts: utility and value. Let’s look at these two concepts and how they apply to setting prices.
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How Competitors Drive Pricing

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Four empty metal bucketsYou need to know the four types of competition.

By August J. Aquila

Intensive price competition in most professional service industries is now a way of life, from hotels to airlines, from car rentals to telecommunications and from law firms to CPA firms.

MORE: 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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An important factor affecting a CPA firm’s pricing policies is competition. As clients and prospects become more educated about CPA firms in their market, more sophisticated about the services offered, and more cost-conscious, pricing becomes more important and more firms stress the price of their services, especially in competitive request-for-proposal situations. READ MORE →

How to Tell Who Fits CAS

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https://cpatrendlines.com/2020/10/09/how-to-develop-the-cas-mindset/Then give your pricing “why.”

By Hitendra Patil
Client Accounting Services: The Definitive Success Guide

Will your existing clients or prospects buy higher-priced and more services from you? If you ask them to, will they feel put off? If you do not ask, will you leave real money on the table? If you do not tell them about more services your firm is capable of providing, will they switch to another accounting firm simply because they were not aware of your other services?

MORE: CAS Is an Upgrade Pitch | Hook Your Firm on CAS | Can You Identify Real CAS Prospects? | 8 Ways to Create Your CAS Practice | Do You Value Your CAS Value?
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Pitching relevant services to clients and prospects is nearly a fine art. It is fraught with the risk of coming across as is you have only your own interest in mind. At the same time, clients and prospects may not even know that you offer such services or that they need those services. You can lose such opportunities even before you explore those with your clients/prospects.
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How to Leverage Demand In Your Pricing

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Implementing service differentiation, direct sales and promotion.

By August J. Aquila

Economists define demand as a schedule of the various amounts of an item (a good or service) that buyers will purchase at different price ranges during a given time period. According to the theory of price elasticity of demand, there is an inverse relationship between price and the quantity of an item bought. In other words, as the price of a service decreases, the quantity demanded increases and as the price of a service increases, the quantity demanded decreases.

MORE: 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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It’s very difficult for professional service firms to increase demand by offering a special pricing. For example, if a law firm offered a discount divorce, would happily married couples look for a divorce, or if an accountant offered a lower price for an IRS tax examination, would people who did not receive a notice be at all interested?. In short, it has been difficult for most CPA firms to accurately estimate the demand for their services.
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The Four Phases of Service Life

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Chart of a product life cyclePlus the effects of a late mature market.

By August J. Aquila

There is an important concept in marketing that provides companies with tremendous insight as to what they can expect for their products or services in the marketplace. It’s called the product life cycle and, sooner or later, all products and services will go through the complete cycle. As they do, several external and internal factors change. The accounting industry and the services it provides are no different.

MORE: 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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As this figure shows, the product life cycle is divided into four distinct phrases: introduction, growth, maturity and decline. The most important thing to remember about the product life cycle is that it is intimately tied into the sales of that product or service. It’s important that a firm’s marketing mix change during the life cycle of its various products.
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What We Know about Pricing Strategies

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Price targetWhere penetration comes in.

By August J. Aquila

Pricing in the real world is much different than in the accounting profession. Usually, wholesalers and retailers set their prices by using markups as the product moves through a distribution channel.

MORE: Make the Most of Your Marketing Mix | Marketing Orientation Is What Firms Need | When Hourly Billing Hurts Profits
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Producers or manufacturers usually set a list price. Think of the manufacturer’s suggested list price on the window of a new car. Car dealers will use various methods to price the new vehicle. Let’s look at the most common pricing strategies that you may consider.
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