#RecipeForSuccess: Price For Profit, Part 1
How does your firm price its services? Client Accounting Service (CAS) firms historically bill for their services after the work has been performed, and usually based on the number of hours spent. More and more firms are finding that they can provide their customer greater value by agreeing on a fixed price up front.
My firm implemented a fixed pricing model in 2011. Clients appreciate the reduced risk of no billing surprises. The firm assumes the risk in exchange for greater control over profit by managing the service delivery and handling factors such as poor client response time and reliability. Over the years, we’ve come up with a process to price for profit, which I’m sharing in this #RecipeForSuccess. Part 1 is all about setting up your firm and processes to price for profit. Part 2 covers how to implement fixed pricing.
What is a #RecipeforSuccess? Developed by QuickBooks ProAdvisors®, the #RecipeforSuccess campaign provides key ingredients and steps for accounting pros and their small business clients to achieve success.
Master Chef: Laura Redmond
- 1 lb accounting knowledge
- 2 heaping cups of bossiness
- 1 quart organization
- 1 cup confidence
- 1 tsp sales skill
- 1 pinch attitude
Step 1: Define services. Make a list of exactly what services you offer so that it is clear to prospects: pay bills, payroll, and sales and use tax reporting. Determine where the work is performed: onsite or offsite. Clarify how you meet with clients: your office, their office or via web calls. Figure out your target market: a particular industry, a special expertise in inventory, businesses that speak a particular language, or businesses of a particular revenue level or entity type.
Select the tools your firm will use to perform your services. Look for apps that will automate work and reduce labor. Keep in mind that an added subscription fee for an app is oftentimes a lower cost than the manual labor required without the app. Become experts at using these apps to improve your credibility when selling your services to prospects and improve the efficiency of your staff performing the work.
Step 2: Document procedures. Determine the exact process for how your firm will use the tools you picked to deliver the services you defined. Include screen shots and all of the details of the best practices and unique techniques that your firm has developed over the countless hours of experience you have gained serving your clients. Mentally put your hands on your hips, and in your bossiest inner voice say, “This is how we do things here.” Then, create step-by-step checklists for each individual task. These are shorter versions of the procedure guides. For example, create a checklist for how to create paychecks, another checklist for how to remit payroll tax and another checklist for how to submit payroll forms. These are separate tasks that (for purposes of separation of duties, expertise or security level, or scheduling availability) may be performed by different staff and, furthermore, could be performed at different frequencies on different dates from each other. On each checklist, describe every action that you want the assigned person to perform, and in what order. Staff will use these checklists to perform work and can reference the full procedure guide as needed, such as when they are a new hire or covering for someone who is out of the office. Clearly defined procedures and checklists empower your staff to do their work autonomously, without constant supervision.
Documenting your processes is tedious, but it is the responsibility of the firm. THIS IS YOUR FIRM’S KNOWLEDGE CAPITAL. You have to figure it out here. Do not skip this step. If you don’t figure it out, you will lose efficiency, profitability and scalability. Do you want to sell a service that you or your staff makes up as they go along? Your knowledge capital is your secret sauce. This is what you are selling. The firm will use this knowledge capital to create revenue. Creating a firm that is scalable and ready for growth is not an easy task. Nobody’s going to do it for you. Mapping out exactly what you do and how you do it is a proactive approach to success.
Step 3: Design packages. Group your defined and documented processes together into service packages that you can sell by making them attractive, turnkey solutions for the type of clients you want. For example, a bookkeeping service package may include a subscription to QuickBooks® Online, working the bank feed, reconciling bank and credit card accounts, closing the period, and a controller call. Knowing the efficient tools you will use to perform the work, highlight features of your service, such as faster turnaround time, electronic payments or online access to information. Design packages that showcase the value of your services, not how the work is performed.
Step 4: Provide options. Create different levels of each package to give context and frame your services against each other. Consumers love options. For example, you could offer three levels of the bookkeeping service package, each with increasing level of service, such as frequency that you perform the work and additional services such as payroll and bill pay. Or, offer three levels of each of these add-on services to allow prospects to build their own custom solution. Options change the dynamic to a discussion of which of your firm’s options to choose, instead of which firm to choose.
Step 5: Assign price. Gather information about the customer to discover factors that help you determine the value of your services to them so that you can assign prices to the various options offered. It’s difficult to know how to assign price for value since value is subjective. The higher the perception of value, the higher the price. Creating a brand and positioning your expertise helps you charge higher prices. Charging a fixed fee lowers the risk to the customer and warrants charging higher prices. Attend value pricing webinars and courses to learn tips and techniques to hone your skill at pricing value.
You can make your service packages attractive and beneficial to price-conscious businesses by harnessing the efficiency of standardized processes. Your firm can use modern industry best practices and high-tech scalable solutions to optimize the work and still make it profitable to the firm.
Ready to implement fixed pricing? Here's Part 2, and follow the conversation on Twitter at #RecipeForSuccess.