How to Kill the Billable Hour

The billable hour is a lousy customer experience. Those controversial words belong to value pricing expert Ron Baker.

For many bookkeepers, Baker's take might seem shocking since charging clients by the hour has been such a staple in the industry.

During his appearance on The Successful Bookkeeper podcast, Baker, who had a bookkeeping firm at age 15 and billed by the hour back then, mentioned that his whole life is dedicated to killing the billable hour and the timesheet.

Why? He believes in the following:

  • Clients buy an outcome, not time.
  • Customers want to know the price beforehand and desire price certainty.
  • Timesheets don't improve future performance and take too much time to fill out, without much ROI.
  • Bookkeepers have a distorted perception of their worth and don't charge what they deserve.

In 1989, Baker started offering fixed pricing at his firm. When he began, no one was talking about value pricing. In 1994, he began teaching it and it was still not well received.

Bookkeeping business owners were scared to give it a chance.

Over the years, value pricing would gradually become more embraced, thanks in part to Baker's content, including his many books (i.e., “Implementing Value Pricing: A Radical Business Model For Professional Firms”), Black Swan program, podcast and talks about the topic.

As a result of his efforts, he's helped hundreds and thousands of firms to get rid of timesheets.

So, are you at the point where you'd like to kill the billable hour in your bookkeeping business?If your answer is yes, Baker has some suggestions to make your transition easier.

One client at a timeHe recommends offering a fixed pricing agreement to a current or new customer. Take it slow to see how the client reacts.

Offer pricing packages.Baker is puzzled that car wash establishments are more sophisticated than many accounting and bookkeeping firms because they actually offer pricing options.

People like choices, so by giving them a gold, silver and bronze pricing option, they'll appreciate the opportunity to select. He says to stick to three different pricing packages per client.

Pick a customer you're comfortable with.Baker started with his existing clients. He says you can speak to both current and new customers about your new fixed price agreement. 

When he originally made the switch, he found that his number one piece of client feedback was, “It's about time.” Do your best to work with people you actually like to work with.

Have a value conversation.Get a feel for what customers are trying to get accomplished. Really dig in and spend more time on diagnosis with them and analyze their financial situation. Ask questions. What are their goals? 

When you understand the context your client is in, that will lead to value. Yes, value is completely subjective. It's in the hearts, minds and souls of the person. It's more of a feeling than a number, so it'll take some time for you to find the right pricing.

Baker's podcast appearance was filled with golden nuggets of information, but he added an additional resource by saying that UK-based Value Pricing expert, Mark Wickersham, is another person to check out because of how highly regarded his content is across the globe.

So, there is plenty of content out there that can allow you to eradicate the billable hour in your business without as much pain as you'd think. You just have to seek it out, follow the successful recipe and do the work.

It's true – taking that pricing leap is anxiety inducing because you don't want to lose any existing clients or scare away potential new ones.

That's why Baker says, “The billable hour takes a calculator; value pricing takes courage.”

If that's the case, are you up for the challenge? As always, the choice is yours.

Editor's note: Download a PDF by Mark Wickersham on value pricing.