A Case For Pricing: Unpopular Opinions From Accounting Firm Owners

Pricing in the accounting industry is a complex challenge that many firm owners struggle with daily.

Accounting services often face commoditization, unlike industries where product differentiation can be clear-cut. Many potential clients view different accounting firms as interchangeable, leading to intense competition based primarily on price.

This pressure to lower prices can result in the undervaluing of high-quality, professional services, ultimately hurting the firm’s bottom line and the industry’s reputation.

However, some accounting firm owners are beginning to challenge this status quo with bold, unpopular opinions on pricing. We recently put out a survey about this in the Accounting Workflow Club, and the answers were quite interesting.

This article will explore these perspectives to uncover processes that can help accounting firms survive and thrive in a competitive market.

Unpopular Opinions on Pricing

Unpopular Opinion #1: Pricing Packages Can Be Complex

Leslie Liondas, Owner of Leslie Liondas, CPA, PLLC, has a controversial pricing stance: she believes that offering multiple pricing packages can be complex.

The traditional approach often involves presenting clients with three tiers of services—basic, standard, and premium—in an attempt to cater to various needs and budgets. However, Leslie argues that this strategy can actually complicate the decision-making process and may not always be in the best interest of the client or the accounting firm.

The Case Against Multiple Packages

1. Client Confusion: Offering too many options can overwhelm clients. According to a study by the Journal of Consumer Research, too many choices can lead to decision fatigue, making clients more likely to delay their decision or choose the cheapest option by default, even if it doesn’t meet their needs.

2. Diluted Value Proposition: When clients are faced with multiple pricing packages, the unique value of each package can become diluted. Clients might struggle to understand the differences between the tiers, leading to undervaluing the premium services and pushing for lower-cost options.

Must-Watch:

3. Operational Complexity: Managing multiple service tiers can add unnecessary complexity to your accounting firm’s operations. Each package requires different deliverables, monitoring, and billing processes, which can strain resources and reduce efficiency.

The Benefits of a Simpler, Transparent Pricing Structure

1. Clarity and Trust: A simpler pricing structure can improve transparency, fostering trust between an accounting firm and its clients. Clear, straightforward pricing helps clients understand what they are paying for and eliminates the confusion accompanying multiple packages.
2. Improved Client Relationships: Simplifying pricing can also improve client relationships. When clients feel confident in their choices, they are more likely to appreciate the services they receive, leading to higher satisfaction and loyalty.
3. Focus on Value: By streamlining the pricing model, accounting firms can focus on delivering high-value services without the distraction of managing multiple tiers. This approach lets you emphasize quality over quantity, ensuring every client receives the best possible service.

Unpopular Opinion #2: Hourly Billing Can Still Be Your Friend

Elizabeth Bassham Bennett, an accountant at Swift Accounting, brings a fresh perspective on the practice of hourly billing.

While many accounting industry experts and consultants advocate moving away from hourly billing in favor of value-based pricing or fixed fees, Bennett opines that hourly billing still has its place in specific situations.

The Case for Hourly Billing

1. Transparency and Trust: Hourly billing offers a straightforward and transparent pricing model that clients can easily understand. This transparency can build trust, as clients can see a direct correlation between the time spent on their project and the fees charged. A study from CPA Practice Advisor found that clients appreciate the clarity and simplicity of hourly billing, as it avoids the complexity and potential confusion of bundled service packages.​

2. Flexibility: Hourly billing provides flexibility for your accounting firm and the client. For projects with uncertain scope or those that may change dynamically over time, hourly billing ensures that clients only pay for the actual time spent without the need for constant renegotiation of fixed fees. This model can be particularly useful for new accounting firms, clients, or projects with unpredictable workloads.

3. Accurate Cost Reflection: In certain scenarios, hourly billing can accurately reflect the cost of complex or labor-intensive services. For example, detailed forensic accounting or extensive audit services can be unpredictable in terms of time required. Hourly billing ensures that the firm is compensated fairly for the effort involved without the risk of underestimating the time needed.

Unpopular Opinion #3: Fairness is Subjective

Donna Reade, CEO of Team Reade Inc., offers a viewpoint on pricing: she believes that the concept of a “fair” price is highly subjective. Reade asserts that pricing should reflect the accounting firm’s willingness to work, the value proposition, and the specific needs and dynamics of each client. Her exact words capture this sentiment perfectly: “Fair price is a matter of perspective. Price based on how excited you are to work on that project and with that client.”

The Perspectives on Fair Pricing

1. Value Proposition: An accounting firm’s value proposition is a crucial determinant in setting fees. What one firm considers another might undervalue a fair price if it fails to account for the unique value and expertise it brings to the table. This is because clients are willing to pay more when they understand the distinct benefits they receive.
2. Client Needs and Preferences: Clients have diverse needs and preferences, and a one-size-fits-all pricing approach often fails to accommodate these differences. By considering factors such as the client’s industry, the complexity of their needs, and their budget constraints, accounting firms can set fair and reasonable prices to both parties.
3. Engagement and Excitement: Donna Reade’s perspective emphasizes the importance of the firm’s enthusiasm and interest in a project. If a firm is particularly excited about a project or finds the client relationship inspiring, this can be a factor in determining price. Enthusiasm can lead to better performance and greater client satisfaction, justifying a premium price. Conversely, less engaging projects might also be priced higher to motivate the team to work on them.

Unpopular Opinion #4: Focus on Profit, Not Approval

Cody Ring, another member of the Accounting Workflow Club, presents a bold stance on pricing: firms should focus on profitability rather than seeking approval from competitors or undercutting their value to win clients.

Pricing should reflect the firm’s expertise and ensure financial sustainability, rather than being influenced by the fear of losing clients to cheaper alternatives.

The Case for Profit-Focused Pricing

1. Reflecting Expertise: Pricing should be a testament to an accounting firm’s expertise and the value it delivers. This approach not only ensures that the firm is compensated fairly for its services but also positions it as a premium provider in the market.

2. Ensuring Financial Sustainability: Setting prices that cover costs and ensure a healthy profit margin is crucial for any firm’s long-term sustainability. Undercutting prices to win clients may provide short-term gains, but it often leads to financial strain and compromises on service quality.

You may be interested in:

Tips for Increasing Fees With Current Clients: What Accounting Firms Need to Know

3. Avoiding the Approval Trap: Seeking approval from competitors or peers and trying to match their pricing strategies can lead to a detrimental race to the bottom. Instead, accounting firms should confidently set prices based on their unique value proposition and market positioning.

Unpopular Opinion #5: Ditch the Round Numbers

Richard Roppa-Roberts, Founder of Roundtable Labs, challenges the conventional belief that round numbers are easier for clients to accept. He advocates for the strategic use of non-round pricing, citing its psychological impact and potential to reduce client negotiations.

This approach can create a perception of precision and fairness, subtly influencing client behavior in a positive way.

The Psychology of Non-Round Pricing

1. Perceived Precision and Fairness: Non-round numbers can give the impression of a carefully calculated price, suggesting that the fee is based on specific considerations rather than regular rounding.

2. Discouraging Negotiations: When clients see a price like $4,987 instead of $5,000, they are less likely to haggle. The precise figure implies that the price is finely tuned and has little room for adjustment.

3. Standing Out in the Market: Using non-round numbers can also help a firm stand out in a crowded market. It creates a unique pricing strategy that catches the client’s eye and can make the firm seem more detail-oriented and meticulous.

Actionable Takeaways

Implementing these unpopular opinions on pricing requires strategic thinking and a willingness to challenge conventional wisdom.

If you are interested in integrating these ideas into your accounting firm, consider these practical steps:

• Value Assessment: Conduct a thorough assessment of your services to determine their unique value propositions. Use this information to set prices that reflect the true worth of your expertise.
• Review Current Pricing Packages: Evaluate your existing service tiers. Identify any overlap or confusion points and consider consolidating them into simpler, more transparent options.
• Client Communication: Clearly explain to your clients the benefits of a simplified pricing structure, highlighting its ease of understanding and predictability.
• Combine with Other Models: Consider hybrid pricing models using hourly billing alongside fixed fees or value-based pricing for different project phases.
• Continuous Improvement: Stay updated with industry pricing trends and refine your pricing strategies continuously. Adaptation is key to maintaining relevance and competitiveness in the market.