You’re the expert in your line of accounting; you have a dedicated team that’s as experienced as it is friendly, your website’s a cinch to navigate. What’s left? That’s right, pricing your services.
Being able to sell yourself at a price that conveys the value you provide without unduly breaking the bank is critical to winning clients. If you don’t price your services correctly, you may be forced to scrape by and keep hustling — even if you’re the best among the competition.
When setting prices, it helps to have a good understanding of pricing psychology and a handle on what your competitors are charging. It can be a daunting process, but in reality it isn’t. This article will help you out but first, let’s go back to the basics.
Five pricing strategies frequently used by accountancy practices
If you’ve been setting your prices ad hoc so far or simply want a change from your current strategy, it makes sense to look at what your competitors are doing. Typically, accountancy practices follow one of five time-tested pricing strategies:
1. Flat-fee pricing
This is perhaps the simplest pricing strategy of all — you charge your clients a flat fee for your services, declared upfront, regardless of the time and effort spent on delivering services. It’s ideal for repetitive services like general tax returns.
- Both you and the client know exactly what to expect
- Easy to implement, as you don’t need to do complicated calculations for the bill
- Inflexible, which means extra effort or value goes unnoticed
- Not ideal for complex projects that may evolve over time
2. Cost-plus pricing
This is another essential and easy-to-implement strategy that’s exactly what it sounds like — the cost of offering a service, plus a certain percentage that you choose as your profit margin.
It differs from flat-fee pricing in that the actual amount will go up or down depending on what your final expenses look like.
- Allows for a decent amount of profit even if your expenses are variable
- Easy for your clients to understand
- Often fails to capture the real value of the services you are offering
- Doesn’t take competitor pricing into account
3. Time-based pricing
This is a strategy used commonly by accounting firms around the world. It’s a traditional approach that involves billing clients for the firm’s number of hours for services rendered at a specific hourly rate.
- Easy to implement
- Gives the firm greater clarity on the effort they have put in
- Doesn’t always reflect the total value of the services rendered
- Can lead to an unexpected bill for the client at the end that may lead to a dispute
4. Value-based pricing
This pricing strategy is based on charging for the kind of value that clients perceive in your services. It’s based on market research, customer segmentation and competitor analysis, and an understanding of what differentiates you from the rest, which will then help you put a monetary value on that differentiation.
- Helps attract the right clients who value your services the way they should be valued
- Can boost client loyalty
- Challenging to implement on a repeated basis
- Requires extensive market research
5. Competition-based pricing
Many firms like to set their final prices depending on what their competitors are doing and how they can differentiate themselves. As such, there are three options:
- Offer the same level of services as the competitors, at a lower price
- Provide better services, at the same price
- Deliver truly superior and unique benefits, and charge a higher price
Even if your practice doesn’t ultimately go for competition-based pricing, it helps to do this evaluation to know precisely where you stand vis-a-vis the competition in terms of pricing and service quality.
- Enables marketing services in a compelling way
- Helps avoid losing clients to competitors
- Can create a reactive mindset to pricing and selling rather than a proactive mindset
- Could lead to prices being set too low for the kind of services the firm is offering
Best practices of designing a smart pricing strategy
1. Take organic changes into account
When setting your prices, you naturally want to make a profit. However, for long-term stability, you need also to consider how your target audience values your services (as opposed to how you value them yourself) and whether that might change seasonally or over time.
During tax season, for instance, your clients might be willing to pay an increased amount for you to do their tax returns. However, during the rest of the year, they may be less ready to shell out a lot for routine tax work. Apart from profitability, therefore, you’ll also need to consider stability and organic growth.
2. Give your customers options
Particularly if you offer a variety of services, a menu of pricing package options makes a lot of sense, as customers can examine the options and choose the one that best fits their needs, wants, and budget.
A set of smartly designed packages, plus an option for custom add-ons, will give your customers control over their choice and make it likelier that they’ll sign up with you.
3. Try price anchoring
This time-tested pricing strategy taps into customer psychology, where people buy based on the comparison.
It involves juxtaposing a product subsequent to something much more expensive or by prominently showing the MRP versus the discounted price so that people feel like they are getting a bargain.
For your accountancy practice, this involves coming up with a set of packages at different price ranges, from basic to premium, and clearly defining the benefits of each. This way, customers can pick the package that gives them the most value.
4. Set prices based on your firm's beliefs
This is a point that many firms tend to overlook. Your pricing strategy can’t be an afterthought. It needs to be baked into the kinds of values and beliefs that you uphold to your clients.
If you market yourself as a simple, no-hassle type of firm, a flat-fee or cost-plus strategy will fit well. A value-based pricing strategy with higher price tags will be better if you’re more about exceptional service for premium clients.
By choosing your strategy well, your clients will view your prices as part of what makes you unique and be happy to pay.
Over to you
The success of your accountancy practice depends on how you implement a pricing strategy that drives high profitability and ensures business longevity.
Sure, it is essential to play safe, but you have to develop purposeful prices if you want to take your practice to greater heights. So take the first step and reassess your pricing. If you need help evaluating your current structure, hop on a call with an expert from Stellaripe today!