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Why are hourly rates such a big problem for bookkeeping work?
The first reason is to do with price psychology.
When people ask the price for your work, and you respond with an hourly rate, what has been the reaction you get? I would guess they say: “That’s too expensive.”
Why is that?
It’s because no one is actually interested in buying an hour of your time. Clients are interested in a solution to their problem, they are interested in the end result.
Another problem with giving an hourly rate is that the client will take that figure and subconsciously compare it to other rates to consider whether it is a good deal or too expensive.
Without even thinking about it, the client will compare that hourly rate to what they pay their receptionist, what they pay their cleaners - you have no idea what that client is going to compare your price too, you have no control over that thought process.
They will almost certainly come to the conclusion that your price is too high.
The second reason that giving an hourly rate can be problematic, is you don’t know how long the work is going to take.
You can’t give the client a total fee because you won’t know until the work is finished. That means the client has no certainty over the price, they can’t budget or plan, and the price will always be a shock at the end of the project. It’s why time based billing is often called ambush billing.
Clients need to know with certainty, upfront, what the price will be, and hourly rates just cant give them that.
I’m going to be running a free webinar on this subject called ‘How to Price Bookkeeping.’ I’ll be teaching how to package and price your services, as well as some other fundamentals of value pricing, which you can use to improve the profitability of your bookkeeping business.
You can sign up for that webinar here.
About the Author
Mark Wickersham, FCA – Chartered Accounted, public speaker and #1 best-selling author – is known as the most sought-after profit improvement expert in the accounting community.
Mark is also a widely published author on practice issues. In May 2011 his book, “Effective Pricing for Accountants,” was a number 1 Amazon bestseller.