FIRM OF THE FUTURE. Become a Trusted Advisor. Pricing your practice: Getting started

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1 Become a Trusted Advisor Pricing your practice: Getting started

2 01 Pricing your practice: Getting started Pricing your services like products Your baseline is a product, it leads to a value added service. In this blog we ll run through how your thinking needs to change towards viewing services as products and how you can easily make the switch away from time. I ll be referencing my first hand experience at Interactive Accounting, so apologies if this gets repetitive in it s mentions. Your baseline service offering, the essentials, should be productised with a defined scope, list of deliverables and timeframe. You will need to give your product it s own flavour and choose where you sit in the market to make it profitable. You can then provide customisable service offerings as a value add. Let s look at the worlds most valuable company for inspiration. Apple has a hardware/software combination as it s core product. It s premium, but ultimately is a platform for value added services and products, like the App Store, itunes and other devices like the Apple TV. But I m unique I m not productising anything, people don t like products... Really? So why do Dell and Apple, preloaded product companies, exist over the custom assembly model that prices products differently for each customer? Because clients know what their getting, buy decisions are clear and they are happy to pay for more for the unique extras. If you take the non productised or custom approach every time, you have no way to identify what your company does well and what clients are paying for. Their buy decision also become more difficult without a clear set of deliverables for a fixed price. Once you have trust, you can then suggest additional services and get into high value engagements. First though, you need to get the basics done and learn their business. 2 Pricing your practice

3 Become a Trusted Advisor See how other leading firms are value pricing and bundling their services... Just look at the example below from Cornerstone Group Pricing your practice 3

4 01 Changing your fee structure Apple rarely discounts as it s a premium play in the market, it s market share has expanded rapidly despite that cost. At Interactive Accounting we took this approach with our last pricing strategy. We also added in a wider service range and made the base level a more sophisticated product. We removed our smallest plan as a public offering and increased the feature set of the baseline product, a quarterly offering that included management reports and an interactive reporting dashboard via a third party application (Fathom). We also added support tickets with Zendesk across all plans to help with bookkeeping, accounting, tax or anything that was a quick answer with varying levels of support provided based corresponding to the level of the plan. The result was an increase in signups, revenue, and quality clients where the scope for growth and value add work was much larger. The result makes sense in hindsight, but, at the time we saw it as a bit of a risk. A little tip.. Look after your loyal clients by grandfathering them in (leave on current fees) and gradually move them up to the new client fee levels. 4 Pricing your practice

5 Become a Trusted Advisor $ Pricing your individual services and combining into packages This is the easiest way to begin pricing your individual services. For Accounting Break down your clientele s basic compliance and reporting needs into 3 groups (small, medium or large) based on the level of service they require. With the automation of data flows now available, you should focus on the frequency of strategic advice required. For Bookkeeping Review your client base and determine the time it takes per transaction and then look to find a transaction based model. Building individual services Look at granular services that you can provide your customer e.g. prepare monthly financials and breakdown for each service, and note the following: 1. The work that is required to be completed; 2. The products they require (online software), if any; 3. Establish the experience level of the staff member they will need to execute on that particular service being completed; 4. Allocate times to each of the steps given the job/role; and 5. Multiply the time by the hourly rate to determine the revenue required to cover the service and make a profit; 6. Add in the costs of the software being used (factoring in any rebates you may receive) From this you should be able to determine the total baseline cost for this individual service and what it includes. Pricing your practice 5

6 01 Build packaged offerings You can then move to bundle up services into packages, using the price for the services calculated above and creating packages (usually monthly, quarterly, annually or Small, Medium, Large) following the steps below: Step 1: Establish a baseline price for a packaged service by adding the sum of the total services created above. Step 2: Discount for any efficiency gains to be achieved by standardising the baseline, using cloud accounting tools and doing a larger piece of work for the client. Step 3: Show an annual and monthly fee The world is moving towards a subscription economy as consumers are now accustomed to consuming goods, services and memberships on a retainer basis with a set list of deliverables/ entitlements. Step 4: Can you sell it at that price? Hard to market $ p.a. Easy to market $3.300 p.a. You should now have a pricing matrix, with a list of services, what their baseline cost is and the baseline RRP in order to take to market. However, it s always good to test pricing changes. 6 Pricing your practice

7 Become a Trusted Advisor Sanity Check Make sure when you run through the packages you ve created it makes sense to a third party such as a client or a business mentor and ask yourself: Can you market it? Would you pay the same for an equivalent service (e.g. a lawyer)? If the answer is no, then revisit your pricing matrix once more and tweak it until it makes sense to you. Next steps - tracking your outcome attached to the change Now the hard part comes, delivering and measuring Make sure you ve got systems in place to track the success of the pricing. You should look at the current number of clients you sign up each month, their average value and then compare to each subsequent month. If the experience at Interactive Accounting is anything to go by, the package pricing mentality has been one of the keys to building a ~20 person practice in under 5 years in multiple locations. By Guy Pearson practiceignition.com Pricing your practice 7

8 For more information call or visit intuitglobal.com/au/firm-of-the-future/ Intuit