MArk Wickersham
If you saw my last video, or read my last blogs (Part 1, Part 2), you may know I am currently in the process of analyzing the data we have received from the largest ever study into how accounting professionals price their bookkeeping services.
I have noticed that there is one huge mistake nearly half the people are making.
2683 people participated in this study, of which the spilt was almost 50-50 between professions; with 1059 bookkeepers taking part, and 1395 CPAs or accountants. The majority of people were from Canada and the US.
Insightful Accountant was a key sponsor for this study and helped us to reach a larger audience.
If you read my previous blog you may know that the study revealed those who use hourly rates to price bookkeeping services on average charge $40 an hour.
The survey also revealed that those who use hourly rates generally charge lower prices than those who are value pricing.
In this blog I am going to focus on something else the study revealed - the huge mistake accounting professionals are making.
If you would prefer to watch this in a video you can click here to watch it.
In the survey I asked participants this question:
Do you always review your prices for every client at least once per year?
I was fascinated by the results: 49.6% said they reprice every single year, whilst 50.4% don’t.
That’s concerning. I never realised until this study just how many people let the price stay the same every year.
This is a huge problem. We need to be changing our prices every year, if for no other reason than inflation. It’s expected that prices will go up because your costs are going to go up. If you leave your price the same your profit margin is going to decrease every year.
This is one of the reasons that accountants and bookkeepers often find themselves working crazy long hours for not enough money.
One of the reasons accounting professionals don’t want to increase their prices is because they fear having that conversation with the client. The problem is, if you don’t change the price after one year, it then becomes two years, then three, and the conversation gets even harder, and you are even less inclined to brave that conversation.
You can’t keep pushing it back. The longer you leave it the harder the conversation becomes.
It also means that if you wait too long to change your prices, the increase will have to be much greater to compensate for inflation and those years of lost profit.
If you review your prices every year you may only need to put it up 3 or 4%, whereas if you leave it for 5 years you may have to raise it by 20% just to get back to where you would have been had you reviewed your prices annually.
By putting the conversation off, you are creating a bigger problem for yourself further down the line.
Half of the people who answered the survey do review their prices annually. Interestingly, when I looked at the top performing firms and compared them to the bottom performing firms, I noticed that the people getting higher prices are much more likely to reprice every year.
The conclusion is, if you put your prices up every year, you will be able to charge higher prices and as a result you will make more money.
The question then, is how do you put your prices up?
You need to become comfortable with talking to your clients about price. If you learn the skills and processes that you need, you will become much more confident.
The accounting profession has this fear of increasing prices, but the reality is most people in life expect prices to go up because of inflation. If you put your prices up every year, clients will expect it as a part of your business. They won’t be shocked.
The problem is in our heads - we fear the client’s reaction, we fear we will lose them.
If you lose one or two clients, it doesn’t matter - not all clients are good clients. If you are not putting your prices up for the one or two people that might complain then you are sabotaging your profits. You are better off without them.
I would advise that you put your prices up once a year at minimum.
Sometimes, you have to do it more frequently as scope changes. For example, if your clients are growing their business and the number of transactions is going up, there is more work for you, so the price should be higher.
Manage expectations at the outset of the relationship with a brand new client. Explain to them how you price: if the scope increases, so will the price. Explain to the client that you revisit the price every year, but will review more frequently if there is a change in circumstances - that’s completely reasonable.
We are currently analysing the results for the bookkeeping study. The full research report is due to be published September 2019.
If you want to find out how to get a copy of that report, I will be revealing more of the findings in a webinar I am running at the end of August 2019. I’m running it twice, once on the 27th, once on the 29th.
The webinar is called How to Price Bookkeeping. On that webinar I will be sharing some powerful strategies and effective practises you can use to ensure your bookkeeping service is always profitable.
You can register for that webinar here.
I look forward to seeing you there.
Wishing you every success on your pricing journey.
-- Mark Wickersham, Chartered Accountant, public speaker and author of amazon #1 best seller “Effective Pricing for Accountants”