Value-based pricing is where you group your services into bundles that you charge a set amount for. Using this pricing method means your clients know what they’ll be paying from the start, and you know how much you’ll get in return. But switching from hourly rates to value-based pricing can be tricky, which is why we’ve created this guide to help you transition easier.
This guide will cover:
- The benefits of value-based prices
- How accountants can implement value-based pricing
- Software to help you improve profit margins
The benefits of value-based prices
While following an hourly rate is great if you know exactly how long a task will take to complete and you always end up getting it done in that time. But value-based pricing can free you from the constraints of hourly billing in a number of ways, which we’ve listed below:
- Separates time from profit. The hours you work no longer directly affect your potential profit.
- Gives an incentive to improve efficiency and productivity. Value-based pricing directly rewards you when you learn new skills to find a more efficient way to work.
- Reduces surprises for clients. If a project takes longer than expected, clients can feel ripped off when they receive the final accounting bill. Usually, this happens when they don’t understand the amount of work that goes into the task. Value-based pricing gives the client a fixed price upfront, thus eliminating surprises.
- Improves collaboration. If clients know how much they’ll be charged in advance, they might be more likely to communicate better with you to get maximum value for their money. This improves collaboration and allows you to do your job more efficiently, which helps keep your client happy. It’s also a great opportunity to upsell your other services.
How accountants can implement value-based pricing
We’ve listed a few tips below that will help you transition to value-based pricing easier.
- Prepare a strategy
You can’t just change your pricing policy overnight without confusing or upsetting clients. Changing your pricing model takes careful planning and a good strategy for how to implement it. The better prepared you are, the smoother it’ll go when you present the change to your clients.
Take some time to read up on what value-based pricing entails, using resources and documents from industry experts to gain valuable insight. You could also consult other accountants, as well as bookkeepers and accounting software providers to get their views.
Other firms might be reluctant to share their pricing model in detail, but if you have friends in other firms, they might at least share their thoughts about the process.
- Create bundles service packages
Bundling your service packages will make life a lot easier for you and your clients when you transition to a value-based pricing model. Group your services together that typically go hand in hand and sell them at a fixed monthly price.
Service bundles allow your clients to choose a package that best suits their needs and requirements. It saves them from having to worry about details to pick and choose from a long list of individual services.
A good approach to service bundling is to offer different price levels that reflect the value clients will get from your service. This also gives you the opportunity to upsell your higher-priced packages and move clients to a higher tier.
- Set your prices
Once you’ve bundled your services, you need to decide how much to charge for each one. This part is crucial to get right since charging too much or too little can have serious effects on your profitability.
Ideally, the discussion on prices should involve people from every department within the firm to ensure everything gets taken into accounting. It could also be beneficial to bring in external voices, like a business advisor.
It’s a good idea to decide different levels, such as:
- Reservation price: the lowest price you could sell a bundle for and still make a profit.
- Expected price: a reasonable amount to charge for a bundle that means fair profit for you and good value for the client.
- Ideal price: The highest price you could ask a client to pay for a bundle without overcharging them.
- Make use of modern technology
Modern accounting software that you can access online from anywhere is a huge driver for value-based pricing. Accounting technology makes it easy to collaborate with clients remotely and give you instant access to real-time data that will help you do your job more efficiently.
By automating repetitive tasks like reconciliation and general bookkeeping, accounting software also reduces your overheads and cuts your IT costs since upgrades and backups are handled. Accounting software like Countingup will empower you to make the most out of value-based pricing.
- Start slowly
Implementing value-based pricing means changes for you and your clients. Make sure you have these conversations early so clients know what to expect. It’s also best to start slowly and only introduce your new pricing model to one or two clients initially. You might pick a small client that’s flexible and easy to engage with and see how it goes.
Alternatively, you could simply start with a brand new client to simplify the work involved and make the pricing conversation easier. The goal is to learn from these initial rollouts and examine what works and what doesn’t. You can then tweak your pricing method and bundles as needed to achieve the desired results.
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