Implementing consistent pricing strategies in your accounting firm

Is your accounting firm making as much money as it could? In today’s fast-changing world, a good pricing strategies is the key. It’s like your firm’s secret weapon. The right prices can bring in new clients. They can also help you beat the competition. Plus, you can grow your business without losing profits. Getting your pricing right can boost sales and profits without spending more on marketing.

This guide will help you understand pricing. We will look at why firms are changing their prices. We’ll explore different pricing plans and how to choose the best one for you. We’ll also look at how to tell clients about price changes.

Pricing: Your accounting firm’s secret weapon

In today’s uncertain business world, having the right pricing strategy can be a powerful advantage for your accounting firm.

A good pricing strategy helps you to:

• Get and keep clients.
• Reach your goals, like growing your market share, increasing profits, or beating the competition.
• Expand your business while staying profitable.
• Boost sales and profits without spending more on marketing or cutting prices too much.

According to research by McKinsey, a 1% increase in price can lead to an 8.7% rise in operating profits. The bottom line is that the right pricing strategy can help your firm make the most money and gain an edge over competitors.

Here’s what we’ll cover:

• Why accounting firms are rethinking their pricing.
• How to evaluate your current pricing strategy.
• The pros and cons of different pricing strategies.
• Why value-based pricing is becoming more popular.
• How to choose the best pricing structure for your firm.
• How to introduce pricing changes to your clients.

What is a pricing strategy?

A pricing strategy is how businesses decide how much to charge for their products or services. It takes into account the value of the brand, the market, and the customers. It also depends on what’s happening in the industry, the company’s goals, the competition, and the economy. The aim of a pricing strategy is to find the price that helps you make more money while still attracting and keeping clients.

Why is pricing strategy important?

Pricing affects your profits and how customers see your business. If your prices are too high for what people think your company is worth, you might lose customers. If your prices are too low, you might also lose customers. It’s important to remember that pricing strategies aren’t set in stone. As the business world changes, companies may need to adjust their pricing.

Why pricing models have changed?

Several things have led to changes in pricing models:

Technology and Automation: Cloud computing and other accounting software have made accountants more efficient.

• 83% of accountants believe they need to keep up with technology to stay competitive.
• Over 90% said cloud-based accounting software has greatly changed their business.

Changing Client Demands: Clients want more from their accountants.

• 87% of clients expect more flexibility and better service without higher fees.
• Clients increasingly want business and strategy advice, not just basic accounting.

Buyers’ willingness to pay:

• 63% of buyers reported paying for accounting services through fixed monthly fees or per-project basis.

Automation and price increases:

• Accounting firms are nearly 3.5 times more likely to successfully increase their prices when they can communicate the benefits of automation to clients.

Services becoming similar: Automation and more competition are putting pressure on prices.

Changing your pricing strategy

If you want to change your pricing strategy, start with a clear plan and goals. Think about what you want to achieve and why. Consider the services you offer, the markets you’re targeting, how sensitive your clients are to price and what your competitors are charging. Also, think about your firm’s values and principles. These will guide your decisions and how you present your firm to clients. A well-thought-out pricing strategy can help your firm grow and stay profitable in the long run.

11 Best practices for evaluating your current pricing strategy

1. Do market research: Ask your target market what they’d pay for a service and how they want to pay.
2. Look at your competition: See how successful firms price and package their services.
3. Know your firm’s value: Identify and communicate all the ways your firm provides value.
4. Test and revise: Keep testing until you find the right balance between customer budget and your revenue goals.
5. Consider your growth strategy: Decide how aggressive you want to be with pricing based on your growth goals.
6. Align pricing with business strategy: Make sure your pricing matches your overall business goals.
7. Consider product led growth pricing: Connect your pricing to a business metric that the client values and that you have a direct positive effect on.
8. Define your best customers’ needs: Find the 20% of your customers who will spend more with you then meet their needs.
9. Resist commoditisation of your services: Add extra features, services and approaches to make your offerings worth a premium.
10. Know your brand value: Understand how your firm is seen in terms of brand value and price accordingly.
11. Know your market: Understand what your ideal client expects and meet those expectations in every part of your business.

4 Essential tasks when devising a pricing strategy

• Consider your target audience: Are you targeting small businesses or large corporations?
• Consider your unique selling proposition: What makes your services unique?
• Define your scope of work: What exactly will you be doing for the client?
• Consider your costs: How much do your accounting services cost to deliver?

4 Best practices for introducing pricing changes

• Use multiple platforms to communicate pricing changes, such as calling or meeting with clients in person, or sending a letter.
• Focus on the value that your services deliver, not just the tasks you perform.
• Understand your client’s business challenges and position your services to directly address those issues.
• Communicate confidently and avoid sounding apologetic.

Pros and cons of 5 popular pricing strategies for accounting firms

1. Cost plus pricing

This involves adding a fixed percentage on top of your costs to determine the price.

• Pros: Simple to implement, easy to justify price increases, provides a consistent return.
• Cons: Can result in prices that are too high, doesn’t guarantee all costs will be covered, doesn’t encourage efficiency, and doesn’t always reflect customer value.

2. Flat rate pricing

This involves charging a fixed rate for a service instead of charging by the hour.

• Pros: Rewards productivity, transparent and easy for customers to understand, simplifies cash flow management.
• Cons: Can lead to poor quality, any obstacle that gets in the way of productivity reduces income, can be that a pre-packed one-size-fits-all approach satisfies no one.

3. Competition based pricing

This involves researching your competitors’ prices to determine your own.

• Pros: Reflects market dynamics, benefits from competitor experience and market research, quick approach.
• Cons: Can lead to lower margins, companies that base their prices on their competitors’ prices can risk leaving potential revenue and profit on the table if they have a premium or superior product, you have less in-house insight into what price is acceptable to your customers.

4. Time based pricing

This is where prices change depending on the time of purchase.

• Pros: Allows businesses to remain competitive, by adjusting prices to match demand, businesses can reduce excess inventory and optimize their stock levels, Dynamic pricing can provide customers with better prices, increasing customer loyalty and satisfaction.
• Cons: Inaccurate market data can cause significant profit losses, Time-based pricing can be time consuming, Fluctuating prices may cause customer confusion and a poor user experience.

5. Value based pricing

This involves charging based on what customers are willing to pay.

• Pros: Can lead to higher prices, establishes how much a customer is willing to pay for services, potentially increases the firm’s brand value.
• Cons: Client research and product differentiation may require a substantial investment, clients’ perception of value can change over time, evaluating the perceived value of a service can be complicated.

Value-based pricing can help you gain new clients, increase profits, and improve your brand. Value-based pricing is changing the accounting industry by promoting transparency, strategic planning, improved collaboration, and enhanced client relationships.

Steps to value based pricing

• • Change your firm’s mindset: Focus on value, not just cost

• Manage client expectations
• Elevate your services
• Communicate your value — repeatedly
• Use technology to automate your processes
• Continuously assess and adjust your pricing strategy

Choosing the right pricing model for your firm

When deciding on a pricing model, consider the following:

• Understand your clients’ needs and preferences
• Ensure the pricing model covers all costs and provides adequate profitability
• Conduct market research and analysis
• Develop a unique value proposition
• Segment your client base
• Align pricing model with profitability goals

Conclusion

In today’s dynamic business environment, a well-defined pricing strategy is crucial for accounting firms to thrive. It’s more than just setting a number; it’s a strategic tool that attracts and retains clients, achieves business goals, and maintains profitability.

As the accounting landscape evolves with technology and changing client demands, firms must re-evaluate their pricing models. While strategies like cost-plus, flat-rate, competition-based, and time-based pricing each offer advantages and disadvantages, value-based pricing is gaining traction as a way to highlight the unique value an accounting firm provides.

By understanding client needs, aligning pricing with business goals, and effectively communicating value, firms can implement a pricing strategy that fosters growth, profitability, and strong client relationships. Ultimately, a successful pricing strategy is about more than just making money; it’s about positioning the firm for long-term success in a competitive market.

This was all about the “Implementing consistent pricing strategies in your accounting firm”. For more information related to Outbooks accounting/bookkeeping proposal tool reach out to us at info@outbookstech.com or call us at +44 3300578597, UK London