The Goldilocks Approach

Many bookkeeping firms still face an uphill battle when it comes to pricing their services. Indeed, in our survey of owners of bookkeeping firms conducted in April this year we found that 47 percent were yielding less than $60 an hour after allowing for scope creep and other non-billable activity.

While the most profitable firms are well down the road of agreeing a fixed fee for all the routine compliance work, most still sit in the cross fire of negotiating with business owners on an hourly rate basis. Perhaps they should re-read Goldilocks and the Three Bears and arrive at a not-too-high but not-too-low fee, the gold star being a choice of fee structures as in ‘basic’, ‘standard’, ‘premium. Three options allows customers to choose their own trade-off between price and value.

Higher-priced options can offer a range of extra benefits, such as unlimited access to meetings and telephone calls or guarantees on response times for client queries.

The missing ingredient

When drilling down on the survey results we discover that bookkeepers achieving above benchmark performance in terms of fee yield have adopted – indeed embraced – value pricing. Here firms have invested in acquiring the skills and knowledge of a value pricing strategy.

The simplest illustration is when a client is asking for something extra; this is when you need to learn the skills of value pricing – i.e. what is this work worth to your client at that particular time? This is the number one skill of a successful bookkeeping firm today and, because the income from compliance work is falling, if firms and practitioners are not able to do this effectively, they will leave so much money on the table, they run the risk of going out of  business, or, at best, working for a pittance.

Pathways to higher fee yield

The choice matrix noted earlier is the core of any value-pricing strategy because this is where you can have pointer to a ‘customised’ fixed fee solution. Because the value of a service is simply the value your clients place on it, the first step is to have an in-depth conversation with each customer about their needs, goals and expectations. This is a skills set that the contemporary bookkeeper needs to acquire.

It will come as no surprise to any service professional that there’s not a customer alive who doesn’t want to know the price of something before they buy it. That should be to your advantage as it should be relatively easy to get a customer to move over to the new pricing method if they know they’re going to get price certainty.