Pricing your services as an accountant can mean walking a fine line between just scraping by, and your business being profitable.
If you’re struggling to determine a pricing strategy that will work for your firm, it might be necessary to delve into the world of pricing psychology, and take a closer look at how similar businesses have priced their services.
To help guide you, here are some common strategies for pricing as an accountant or CPA:
Cost-plus
This is one of the most basic pricing strategies, and takes the cost of offering your service with a percentage added on to determine what you should be charging your clients to ensure you make a profit:
Pros
- Clients can easily understand it, and it’s simple to implement
- It allows for profit if you have variable expenses
Cons
- It fails to take into account competitors
- Doesn’t always capture as much value as that which clients gain from your services
Flat-fee
As it sounds: this pricing strategy involves clients being charged a flat rate for your services. Usually, clients are made aware of the fee before you begin working for them. Remaining constant whatever the changing cost of your expenses, and whatever resources you throw at a project, while it works well for basic or repetitive services, it isn’t so effective for projects of a more complex nature:
Pros
- Simple for clients to understand and easy to implement
- Both parties know what to expect
Cons
- It isn’t flexible
- It isn’t always as reflective of the value that clients get from your service
Competition-based
In this strategy, your services and prices are compared to those of your competitors, and to make your business stand out, you’ll need to adopt one of the following three modes of competition:
- Offer the same product or service as your competitors but at a lower price
- Provide a more valuable service or experience at an equal price point to competitors
- Provide a superior service or experience and price it higher than your competitors
Be openminded when pricing your services and checking out your competitors, and always be ready to swap strategies for the benefit of your business, should the need arise.
Pros
- Can stop you losing out to your competitors
- Can help with marketing your services
Cons
- Prices may be set at too low a point
- Can prevent a proactive pricing mindset, and encourage a passive mindset instead
Time-based
For many accounting firms, this is their default pricing strategy, and requires them to keep track of every single hour that they spend on a client’s project. It involves providing clients with a list of the services you perform; alongside the hourly rate you charge for each one.
Pros
- Very easy to implement
Cons
- Clients may end up receiving a bill that surprises them
- Isn’t always reflective of the value offered by your firm
Value-based
This strategy centers around your services being priced according to what your clients are willing to pay for them, or rather, the value that they perceive each service to have. It’s essential with this strategy, to set prices that are based on customer segments, and market data you’ve gathered. Once you’ve got a good understanding of which clients might take up your services, and of what your competitors are charging for similar services, you can place your own value on your own business.
Pros
- When used effectively, may enhance client sentiment and loyalty
- Helps to prioritize clients
Cons
- Knowledge of customer profiles is required
- Not as simple to implement
Conclusion
Structuring fees for your clients should never be an afterthought, and coming up with an effective pricing strategy that reflects the value offered by your accounting services, while giving clients a fair deal, should always be your main priority.
