THE RADICAL CPA

How the $25K Rule Works in Pricing

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Toss the timesheets and give your clients more value.

By Jody Padar
The Radical CPA

Consider the $25K Rule.

Because this method requires heavy lifting on the front end, a good rule of thumb is to only value-price engagements of $25,000 or more. If the client falls below $25,000, they are eligible for a fixed price or fixed price plus a value add. This rule is important because if your client is a small business, it doesn’t matter how much value they perceive in your services; they will not be able to afford value pricing above a certain level.

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Most services are fixed-priced, but based on conversations with the client, those prices may drop or be raised accordingly. Some of the data points used to set pricing are the PITA factor (pain in the a#%) and the client’s gross revenue.
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Why Offer Three Service Levels?

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Hand drawing a rainbow-colored 3

You still can add on other services.

By Jody Padar
Radical Pricing – By The Radical CPA

A tiered service offering should provide your clients with three options. According to experts in mindset and pricing, if you provide three options, people will usually choose the one in the middle. That’s the one you are aiming for them to buy.

Also, don’t forget that people buy the payment, not the car. There’s an entire mentality around monthly pricing. If you tell a client it’s a $24,000 engagement, they will balk. They would rather pay $2,000 a month than the full amount all at once. Of course, some clients will offer to give you the full engagement amount up front if the price is discounted. From a cash flow perspective, you can offer a small discount if a client is willing to pay this way.

Creating your service packages is not a one-size-fits-all activity. There should be different tiered service options for each client persona. It is also important for clients to know that they can upgrade or downgrade their service level when needed.
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The Three-Step Formula for Setting Your Monthly Fee

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Hand moving triangle along beam to indicate balance between price and value

How to create price packages.

By Jody Padar
Radical Pricing – By The Radical CPA

Packages are the first step toward productizing your services. Your packages define your services as discrete offerings with defined parameters around what they include and what’s excluded.

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The secret sauce to creating a fixed price package with a value add consists of combining several variables:

Deliverables + Client Persona = Well-Priced Packages

Client-Specific Price Point + Market Price Point = Well-Priced Packages

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Some Clients Just Don’t Fit

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businesswoman smiling at two clients, man and woman

Your team has to talk to them every day.

By Jody Padar
Radical Pricing – By The Radical CPA

A friend who owned a business services firm in the marketing industry once told me he would rather face waterboarding than resign a hard-won client. However, even he cast a big one aside after his key employee returned from a client meeting in tears. Some things just can’t be tolerated. Your job is to determine where the line should be and to make the decision before a bad client has the chance to negatively affect your company.

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A client’s fit with your firm is every bit as important as their behavior and payment practices. After you adopt a new client-centric, value-based business model, some clients won’t fit in. Some will want to stick with the transactional model of the billable hour. They may not be comfortable with your new direction. Some clients may not even want to pay for your smallest service bundle despite the enhanced service levels it includes.
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Four Things to Learn When Assessing Clients

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Businesswoman using calculator while reviewing something on laptop screen

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.

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

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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