Pricing in professional services leaves no shortage to the imagination.
Like the Wizard of Oz making decisions behind the curtain, it often seems each accounting firm employs their own wizard. Assigning prices to services as they pass through the process, usually only notifying the client after the work has been completed. The client is forced to accept the price presumably based on the hours required to complete the work. The pricing conundrum for professional services leaves much to be desired and is downright aggravating.
How do you know if you are getting a deal? Do you compare bill rates among professionals? Does the difference in price signify a difference in quality?
Pricing is a broken piece of the accounting industry.
That’s not how anything else is purchased. Not once have I asked the waiter how many hours it took them to purchase and prepare my meal nor requested the cost and hourly billing information for coffee purchased at my local coffeehouse. There are plenty of markets for services determined by the value received. Why not for accounting as well?
Products are purchased based on the market price for the services when a buyer and seller can agree on the price.
A buyer and seller cannot agree on the price for professional services when there is no price.
The twenty-first-century business highlights the customer experience above all else. The best technology, completed deadlines and great websites cannot overcome trust destroyed by a lack of transparency. While the industry has settled on the billable hour as a compromise for not knowing the time commitment to which the firm is obligating themselves, the customer angst and arguments about unexpected bills are a detriment to the customer experience. An unexpected bill can cause waves in even the most trusted relationship.
Creating an accounting company designed around the customer experience should include serious communication about pricing and billing. While I may not be able to change the entire industry, I have set up my company to take the very best care of my clients.
Let’s pull back the curtain of this so-called wizard.
Here are three factors influencing pricing at my firm:
1. I exist to create value for my clients.
Beyond pricing service and completing required tasks, as a professional services firm, my objective is to generate wealth and value for my clients. Value comes in a variety of formats. It can be the peace of mind that their accounting needs are completed properly, a limiting of time accounting can rob from a business owner or new planning opportunities aimed at minimizing taxes. I seek to identify my clients’ pain points and to maximize value by eliminating them. The value created for the client is factored into the service and they are priced accordingly before work begins.
2. Transactions, employees and accounts matter.
In a planning meeting with a client, determining the scope of the engagement includes the number of employees, accounts managed, the number of invoices to be sent and bills to be paid. This allows me the ability to understand the full scope of services to be provided. The sheer volume of transactions impacts pricing.
3. I believe in upfront pricing.
Twenty years ago in the early days of cell phones, the major wireless carriers employed an opaque pricing tactic with their customers. Pricing was based on minutes used, roaming, the number of texts sent and received and your specific monthly plan.
The day the bill arrived was a day of dread. I loathed opening the envelope and spent a minute assessing its thickness to determine if we had exceeded our monthly allotment of minutes. Extra phone calls, roaming charges and received text messages increased the bill with little ability to control the costs. I once nearly collapsed of cardiac arrest after receiving a $600 monthly phone bill for my wife’s and my two cell phones!
I despised the company.
There was no customer goodwill from me. It seemed like they were trying to extract every penny in my pocket with all without providing value or direct communication. Thankfully, I don’t have to open those wireless bills anymore because the business community and competition have made that pricing a thing of the past.
It isn’t the past for most accounting firms. The mechanism of pricing a service is still as opaque as the cell phone bills twenty years ago.
I would like to change this.
In designing a customer focused firm, I want to emulate companies who clearly communicate their cost structure before purchase. A transparent process to pricing means the price is communicated before the work begins. This ensures the client knows the actual cost of a service before it is performed. No more surprise bills for a service. Know what you are receiving at the time of purchase.
There you have it. If you’ve wondered what goes into a proposal price at my firm wonder no more. Adding value to my clients is my number one goal. I seek to establish myself as the most trusted of my clients’ advisors and believe these pricing methods serve to build a relationship based on trust, honesty and communication.