Apart from bulk-billing medical professionals there is no such thing as a market price for professional services. Whether you are a lawyer, a plumber, an accountant or a bookkeeper, the price for your market services is entirely negotiable. Unfortunately for bookkeepers it seems to be governed by an hourly rate. This, inherently, is a slippery slope.
Think about it, if what you offer can be obtained from anyone, you’re competing against everyone. So if you’re offering an hourly rate for ‘bookkeeping and BAS services’, the buyer has all the power.
Basing price on time is plain silly. It dumbs down the professional service. It’s silly because there is no connection between hours spent and value. The buyer does not buy time from you; they buy your services. Moreover they want absolute certainty about the price and the end result. Actually, business owners hate surprise bills. In short they value your services; the results you produce.
The yearly survey paradox
So why are we fascinated by surveys produced year-on-year on the range of hourly rates? It’s because most people want to see where they sit on the scale; to price themselves in the market and to not fall behind their peers or competitors. Staying in step with industry ‘average’ when based on hourly rates and not on value, puts the professional well below her peers in other professionals including accounting and law.
Professionals earning higher incomes will by-and-large have a financial buffer, whereas those on lower-middle incomes are unlikely to. They live hand-to-mouth, in constant stress about unexpected expenses thrown their way that they had not budgeted for, like emergency dental work or car troubles.
We have a simple belief. Every bookkeeper needs to be a business owner and indeed, should have a great business. But that’s not the experience of most bookkeepers who struggle within an hourly rate regime or a lack of clients.
What about fixed or flat rate services?
Transitioning away from an hourly rate regime requires a degree of self-belief. Consider for example the trend in the legal profession to move towards flat rate pricing. Conveyancing and the like lends itself to competing on price. But for a bookkeeper the quandary is that a fixed price needs to cater for scope creep, errors, missing documentation. It takes a great deal of preparation to cater for all the ‘stuff’ that can happen.
When negotiating a fixed or flat fee, there is a tension between what the buyer has in mind and what you might want to charge. Pitch too low and you have money left on the table; pitch above the buyer’s price and you will be negotiated down.
What is required is a genuine discussion between buyer and professional as to the value of the services based on the buyer’s need; ‘optional’ extra’s and a degree of self believe in the value of the services being offered. That’s a business development exercise for the professional to get into; but, in the end, you can stand out from the crowd.