Value Pricing and Why it Works For Accountants & Bookkeepers
It wasn’t that long ago that we were a profession of – if you’ll pardon the expression – “technological dummies.” We dabbled in technology like basic desktop computers and Nintendo (or maybe that’s just me), but we certainly weren’t plugged in the way we are today.
From paperless tax workflow solutions to hosted applications and iPads, technology is now an integral part our daily lives. It is through technology that integration and streamlined workflow are possible, leading to elevated efficiency and the capacity to take on more work without really working any harder.
Technology is even changing the way firms traditionally bill for services. With streamlined processes, you now spend far less time providing the same services. That means more work can be processed without having to expand human capital.
I realize this is not groundbreaking news, but it’s a relevant reiteration to get to the key point: value pricing.
Think about it. If you are a firm that adopted a paperless, streamlined solution and implemented standardized processes, you are likely turning out work in half the time. However, here’s the question: Is that product or service worth less in the market because you can now turn it around so much faster?
Aaaahh, that’s a big NO! Yet, with the hourly billing model, that’s exactly what firms are implying.
The billable hour pricing model is what’s inherently wrong with the profession. First, it devalues a firm’s services because it locks individual services into a per-hour fee. It’s the firm that should be setting the price based on value, not time.
Second, billing by the hour hinders a firm’s revenue potential because it dictates that revenue growth is only possible by consistently taking on more hourly work. When fees are set based on the value of the work, growth potential is unlimited.
It’s time to stop selling ourselves short by “commoditizing” our services. Hourly billing is the same as giving it away just because we’ve figured out how to do it faster. Accounting professionals should be rewarding themselves – not hurting their ability to make more money or hurting their chances to find the next great client.
Hours x Rate no longer equals value. Value comes from setting a price for a service that meets the client’s perception of value. For example, a small business client will find great value in outsourcing its accounting work to alleviate time-consuming and complex daily accounting tasks. The client doesn’t need to know how quickly you can accomplish these same tasks; it’s the value the client is paying for.
Bottom line: Don’t sell yourself short! You should be rewarded with the fruits of your technological endeavors. Technology has provided you with the ability to work at accelerated speed – and don’t forget how you did the work to implement the right technologies and processes that boosted your firm to a higher efficiency plain.
Now that you are there, it’s time to start billing based on your value.