4 Simple Steps to Building a Pricing Model (and Getting Paid What You’re Worth)
Properly quoting (and collecting) accounting fees can be an overwhelming hurdle for many bookkeepers, especially those just opening up their own practice. If you don’t have a pricing system in place, you run the risk of undercutting your value and inviting potential clients to hire a cheaper (or automated) option.
Fortunately, that overwhelm you may be feeling can be easily dissolved with a few tips and reassessment of your value. Learning how to package your services, create clear offers to reflect your value, and develop a system for charging appropriately for cleanup, onboarding, and ongoing work will enable you to confidently set your prices and find clients who will happily pay it.
How to Properly Package and Price Your Bookkeeping Services
1. Take Control and Own the Value of Your Work
Position yourself as an elite service provider from the very beginning of your relationship with all prospective clients. Your responsibility will be to lead the client through the bookkeeping process, not the other way around. Taking charge at the initial pitch exemplifies your confidence and your knowledge.
We know this might seem overwhelming at first, but you must adopt the mindset that your time is too valuable to waste on mediocre clients. Interview prospects like you are hiring them, not vice versa.
Playing hard to get, being confident, and remaining assertive will actually make clients want to work with you more. It also has the potential to earn you the respect of the business owners, as they could see you from the outset as an esteemed partner and resource, not as an employee. By leading your initial phone calls and meetings, you also avoid a drawn-out sales cycle. You set the stage for an expedited answer. Even if one potential client says “no” fairly quickly, they were likely going to turn down your services all along, so you bought yourself extra time to pursue clients that will have you drawing up an offer letter.
2. Offer Both What Business Owners Want and What They Need
Many business owners may try to dictate your fees based on their understanding of your role. They know they need someone to complete tax return filings, reports, and daily bookkeeping. Maybe they’ve even looked into automated options that claim to do all the tasks they assume must be completed by a bookkeeper.
Part of your job is to highlight the many services you offer that add value to their companies overall. No software program can implement the same processes, systems, or suggestions that a trained CFO-level bookkeeper can. To help these business owners understand what your efforts will contribute, you need to highlight the services and outcomes they truly want.
After working with hundreds of clients over the years, we have determined that all business owners want and value these key deliverables, so be sure to highlight your proven ability to provide them:
- World-Class Bookkeeping: Correct GAAP and tax accounting, a perpetual data room, strong internal controls, and a permanent audit trail help keep business owners in any niche out of financial and legal trouble, as well as laying a rock solid foundation to manage and grow their business. These components also provide much-needed transparency to investors and stakeholders, which boosts the value you offer beyond day-to-day operations and profitability into strategic growth, partnerships, and even successful exits.
- Increased Cash Flow: Company owners need ways to closely monitor and predict cash flow. Staying cash flow-positive is crucial and requires a proficiency in assisting them with financial projections that many businesses are lacking. CEOs need your support in understanding and predicting cash flows so that they can properly manage their business.
- Reduced Tax Liability: Tax filings for businesses in today’s overly-regulated world are complex, requiring solid accounting and processes throughout the year. Owners need their taxes done correctly to minimize what they owe without creating a future liability if the IRS or state auditors show up. For example, many Cannabis accounting clients (i.e. manufacturers of products) miss tax deductions as they are not doing correct cost accounting during the year.
- Robust Reporting: With proper and high-level reporting practices, your client is able to more efficiently run and grow their business. Elevated reporting goes beyond basic balance sheets and income statements, which makes it easier to identify and mitigate risks, as well as communicate vital data to board members, investors, and lenders.
- Peace of Mind: Your clients should be focused on profitability and growth. By ensuring their accounting and bookkeeping are up-to-date and accurate, you help alleviate their stress, and prove to be of immeasurable value.
3. Choose the Right Clients
Getting to know your prospective client is a crucial step in earning the fees you deserve. Remember, you are “hiring” them. To assess if they are the best client for you, you must listen more than you talk. It is important you don’t spend time on a prospect call defending your resume or providing free advice.
Asking direct questions allows you to learn about their business, figure out the scope of work, and demonstrate your authority. By asking the right questions, you prove you are knowledgeable, well-trained, experienced, and trustworthy. Plus, there’s the added bonus that it is easier to hook your client when you demonstrate that you are a good listener and are engaged and interested in their company (which they will likely enjoy talking about).
Some of the main questions we recommend asking include:
- What is your business entity? Do you operate more than more? How long has each entity been operating?
- Are your tax returns current? Have previous tax returns been filed in a timely manner?
- How many employees are working for the company? Do you have payroll?
- What accounting system is currently in use? How do you prepare your current invoices? How do you pay your bills?
- What, if any, accountants or bookkeepers do you have in-house and/or outsourced? Why are you changing bookkeepers or why did your last bookkeeper leave?
- What financials and reports are currently being completed?
- Do you have inventory? Do you report sales tax?
- Any “big” items planned ahead (exits, acquisitions, etc.)?
- What are the forward 12-month expected revenues (and years two and three if it’s a startup)?
- Any non-accounting compliance work needed?
- Do you have all of your organization’s documents in an organized place that is easy to access for an auditor (leases, bank account information, etc.)?
Armed with their answers, you should be able to correctly price your engagement and write up a mutually-beneficial offer letter.
4. Set Your Price, Establish Your Worth
Many bookkeeping professionals are undercharging for their services because they don’t understand the value they provide to their clients and are afraid that charging too much could repel prospects. However, the high price you can charge is positively correlated to the high value you provide. So, how do you name your figure?
- Charge for the benefits you offer, not tasks you complete. Tasks are aspects of your services; these could be technical or descriptive. Benefits are why those tasks matter for your clients. If you have the tools, systems, training, and a supportive, knowledgeable network, you can justify a higher pricing policy.
- Don’t charge hourly for your services. Commit to a value pricing model. Consider multiple variables including forward revenues, number of entities, number of employees, number of verticals, and complexity of work, and then set your price high enough to ensure you make a good return on your efforts and can hire help in the future if the need arises.
- Increase your fees over time. Implement systems and communicate with your clients that you will review their engagement quarterly so that you can set the stage for ongoing fee increases. Managing this expectation up front is imperative, so that you aren’t trapped by an early estimate; if your initial price was too low for the scope of work, you can reassess three, six, or twelve months in. Additionally, as the company grows, so should your fee.
- Expect the unexpected, and estimate your costs accordingly. Based on the information provided in your initial client meeting, determine an appropriate fee, then apply an increase of 20% to account for the work you might not anticipate. For example, if you think $4,000 per month is an accurate estimate for your services, quote $4,800 in your offer letter. Unforeseen work is inevitable, and it is best to plan for the extra time and effort in the beginning, rather than try to renegotiate later on.
- Position your services as an investment, not a cost. As a CFO-level bookkeeper, you should be able to back up your bid with world-class client service, so assume the value of the services you add to the business--over the long term--is at least 10-15% of entity value. As a general rule, for every $1 million in forward revenue, complete bookkeeping, accounting, and tax services will cost a minimum price of $20,000 to $40,000 per year. As more complexities arise (number of entities, consolidations, etc.), that minimum amount will increase.
- Remember, pricing is personal. Assess your situation and price your services according to your needs. Do you need to close this prospect? Are you just starting out and eager for your first client? Or do you have a full accounting practice and are unsure if you even want a new client? Your workload, potential client base, experience level, current income, and other personal factors will affect the final price quoted.
- Confidently submit your offer letter. Offer letters should focus on communicating the benefits of value-add services and deliverables. Your exact list of service offerings and packages should be outlined to showcase the value you will provide, along with the accompanying fee you will charge. Many of these business owners do not understand the complexities involved with proper accounting, so you will be an essential asset and worthwhile investment. When you properly explain your rationale and demonstrate your value in your offer letter, the prospective client will understand your pricing is fair. If they can afford you, you will have a new client paying what you’re worth. And if they can’t, they will release you to work for those who can.
Your expertise is greatly valuable to your current and future clients, and it is part of your job to be able to communicate that value effectively. Demonstrating this value begins with leading the conversation, asking the right questions, and establishing the benefits you bring to them. Establishing your value all means understanding the worth of your own work, and then setting your price accordingly.
Interested in learning more about how to confidently price your bookkeeping services? Check out our on-demand webinar here, where CFO Bookkeeper founder Andrew Hunzicker, CPA, will walk you step-by-step through the pricing process.