How to Price Bookkeeping Services for Profitability

Trying to determine the right pricing point and strategy for your bookkeeping firm? You’re not alone. It’s a common problem many bookkeepers struggle with.

You need to find the right balance between a price that wouldn’t scare away your target market but still doesn’t undervalue your expertise and ensures you’re profitable.

As Loren Fogelman of Business Success Solution said, “A good pricing strategy sets you up for success, work-life balance, and job satisfaction. A bad pricing strategy, on the other hand, sets you up for failure. Pricing is one of those things you must get right to build a successful firm (and the lifestyle you want).”

She’s right. Your pricing determines your firm’s success, and figuring it out will help catapult your firm to the dream 7-figure income range. The 2024 firm revenue report revealed that 0.4% of firms made $5,000,000+ while 8% made between $1,001,000 and $2,000,000.

You’ll learn how to price bookkeeping services for profitability in this piece.

Factors to Consider When Setting Prices

Here are some key factors to consider when setting prices for your bookkeeping services:

Your Experience and Expertise

Generally, the older and more experienced your firm is, the more you can charge. That’s because you can work faster, handle complex situations, and offer greater value to clients, thus justifying higher rates. In the 2024 firm revenue report, we saw that:

• 0 to 1-year-old firms made an average revenue of $77,297.
• 2 to 5-year-old firms made an average revenue of $473,050.
• 6 to 10-year-old firms made an average revenue of $640,870.
• 11 to 15-year-old firms made an average revenue of $375,920, and
• 15+-year-old firms made an average revenue of $626,079.

Client Needs and Complexity

The complexity of a client’s bookkeeping needs will influence your pricing. Businesses with more transactions, multiple entities, or complex tax situations will require more time, resources and specialized knowledge to resolve. Hence a premium price, as you’ll be providing a solution beyond basic bookkeeping tasks.

The same applies to industry-specific needs. Certain industries have specific bookkeeping requirements. For example, a manufacturing company might need inventory management, while a retail business might require point-of-sale integration.

Understanding and catering to these industry-specific complexities allows you to justify a higher price for your specialized knowledge and the value you bring to the client.

Location

Rates can vary depending on your geographic location and cost of living. In major cities with a high cost of living, your overhead expenses, like office space and equipment, might be considerably higher compared to rural areas. You may need to factor these location-based cost differences into your pricing structure to maintain profitability.

Client demographics also play a role. Businesses located in bustling economic hubs are more likely to pay premium bookkeeping fees, especially if they require specialized services or complex financial management.

On the other hand, clients in rural areas might have smaller budgets because they don’t make as much. If you serve such clients, you’ll have to be more cost-competitive in your pricing.

Finding the pricing sweet spot for your location involves balancing covering your business expenses and remaining attractive to your target clientele.

Industry Specialization

A specialist will always command higher rates than a generalist. That’s because clients often seek out bookkeepers who possess a deeper understanding of the financial nuances specific to their industry. This specialized knowledge allows you to not only handle the standard bookkeeping tasks but also offer valuable insights and solutions tailored to their unique needs.

According to the report we’ve been referencing, Bookkeeping is the service that drove the most revenue for firms in 2023 (42.9%). Followed by Tax Returns (33.3%), Accounting (11.5%), Advisory (5.7%) and Consulting (3.8%).

Industry specialization also helps you become more efficient, positions you as an expert, and helps build your credibility.

Competition

Consider the pricing landscape of other bookkeepers in your area. While you don’t want to be the most expensive option, you also don’t want to undervalue your services. Research your competitors’ pricing models and packages to position yourself competitively.

However, don’t compete solely on pricing as it’s a race to the bottom, where everyone sacrifices profit margins. Instead, focus on differentiating your services and highlighting the unique value you bring to the table.

This could involve your experience, specialized skills, exceptional client service, or a focus on specific industries. By emphasizing your strengths and the value proposition you offer, you can attract clients who are willing to pay well for your expertise.

The ideal client isn’t solely focused on the firm with the lowest price. They value expertise, reliability, and the ability to solve their financial challenges.

Common Pricing Strategies for Bookkeeping Firms

There are several pricing models that bookkeepers can use:

Hourly Rate

This is the most popular pricing strategy. Here, you charge a set fee for each hour you spend working on a client’s books. This method offers transparency for you and the client, as they are directly billed for the time invested in their financial management.

It’s easy to implement and understand the hourly rate strategy. You simply track the time spent on each client’s tasks and multiply it by your hourly rate to determine the final fee. This simplicity makes it a good option for new bookkeepers or those with clients whose bookkeeping needs fluctuate month-to-month.

However, this model also has some drawbacks. According to Loren,

Fixed Rate

The fixed-rate pricing model offers a clear and predictable fee structure for both bookkeepers and clients. Basically, you establish a predetermined price for a specific service or a defined package of bookkeeping services. This price remains constant regardless of the actual time spent on the client’s work, providing certainty and budgeting ease for both parties.

Why go for this pricing strategy? “A fixed rate helps you become more profitable as you go. It incentivizes efficiency and you get paid before doing the work. As a result, you’re no longer chasing money.” says Loren.

Value-Based Pricing

Value pricing is about setting a price based on the value to the customer, not based on how many hours something takes. It sounds really simple but it is difficult to implement in the real world

Value-based pricing shifts the focus from the time you spend on bookkeeping tasks to the value you deliver to your clients. In this model, you set your fees based on the tangible benefits your services bring to their business, such as improved financial clarity, increased efficiency, or cost savings. This approach rewards you for your positive impact on your client’s financial health and overall business success.

Loren says this strategy is great because “You end up working with higher quality clients who are not price sensitive… you can earn two to three times higher than when you charge fixed or hourly fees.”

Tiered Packages

This offers a solution for bookkeepers who serve clients with varying levels of bookkeeping complexity. It requires you to create different service packages with predetermined features and price points. These tiers allow you to cater to a wider range of clients by providing options that fit their specific needs and budgets.

It is versatile, and you can adapt it to fit various bookkeeping practices.

The Relationship Between Value and Pricing

When it comes to pricing, clients are only willing to pay a premium for a service they perceive as truly valuable. This perceived value transcends the service itself. It’s about the outcomes and benefits they expect to achieve by working with you.

Before setting a price, you have to understand what holds value for your clients.  While you, as a bookkeeper, might focus on factors like time spent, cost, and profit margin, your clients are primarily concerned with different aspects.

As Loren Fogelman aptly states:

Their perception of value is what ultimately dictates their willingness to pay your price. Clients aren’t simply buying bookkeeping tasks. They’re investing in the peace of mind, improved financial clarity, and strategic insights your services bring to their business.

How to Select the Right Pricing for Your Bookkeeping Services

Here’s Loren’s 5-step “Raise Your Rates Formula” to help you develop a strong pricing strategy for your bookkeeping firm.

1. Identify High-Value Clients: Instead of taking on any client, recognize that some clients bring more value to your firm. This step involves defining the characteristics and needs of your ideal client.
2. Communicate Your Value Proposition: Once you understand your ideal client, craft messaging that resonates with their specific needs and highlights your value. This applies to your marketing materials and networking conversations.
3. Package Your Services: Move beyond hourly billing by creating service packages. Group similar services together into different packages, providing clients with clear options based on their needs. This improves efficiency and increases your profit margin.
4. Implement Value-Based Pricing: Shift your pricing focus from the time you spend to the value you deliver to the client. This allows you to charge a high rate based on the actual benefit your services provide to the client’s business.
5. Master Value Consultations: Don’t pressure clients into sales. Instead, conduct free consultations that focus on value. Ask insightful questions to help clients understand how your services can address their specific goals and the value you bring.

How to Package Your Bookkeeping Services

Want to create packages? Follow Loren’s framework for crafting service packages that resonate with your high-value clients. See a step-by-step breakdown below:

Step 1: Learn about your clients

Reflect on who your ideal clients are. Tailor your packages to their specific needs and preferences.

Step 2: Understand Their Challenges and Goals

Next, pinpoint their specific challenges, frustrations, and aspirations.  Link your services directly to addressing these challenges and achieving their desired outcomes.

Step 3: Create a Comprehensive Service List

Make a list of all the bookkeeping services you offer. Include all minor tasks, major services, and even complimentary services you currently provide.

Step 4: Package Your Services into Tiers (e.g. Silver, Gold, Diamond)

Once you have a clear understanding of your ideal clients and your service offerings, group them into tiered packages:

• Silver Package: This is the basic tier, catering to clients who prioritize accurate and up-to-date financials. It includes essential bookkeeping services.
• Gold Package: This mid-tier package is for businesses seeking more than the basics. It offers in-depth financial insights, specific metrics for informed decision-making, and potentially more frequent access to your expertise.
• Diamond Package: This premium tier provides comprehensive outsourced accounting department services. It’s ideal for clients who require extensive access, have complex financial needs, and value the power of real-time financials for strategic decision-making.

Step 5: Implement Value-Based Pricing

After crafting your packages, price them based on the value your clients perceive, not just your time investment so that you can earn more.

Spend More Time on Billable Work and Growing Your Client Base by Automating Manual Tasks

Bookkeeping firms today manage a vast number of clients. Our latest firm report shows that the average firm juggles 225 clients, generating $623,296 in revenue annually. But with so much on their plates, it can be challenging to scale further. That’s where automation comes in.

Automating repetitive, manual tasks frees up valuable time and resources. Case in point: In our 2023 workflow automation report, we discovered firms that used accounting workflow automation software saw a 50% reduction in time spent on manual work. And in the 2024 version of the same study, 55.2% said automation made their onboarding process smoother.

Need software to automate tedious tasks and scale your firm? Try Financial Cents. It reduces busy work, increases efficiency, reduces errors, and scales with you as your client base grows.

Some of its features include the ability to set up recurring projects, make client requests and automate follow-ups, and ready-made checklist templates to save time and ensure consistency.

Ready To Make Your Firm Profitable?

If you don’t remember anything about pricing your services, remember this: it’s all about understanding the value you bring to your clients.

The first step is identifying your ideal client. Who are the businesses you truly want to work with? Once you know this, you can modify your service packages to address their specific needs and challenges. Ditch the one-size-fits-all approach and create tiered packages, like Silver, Gold, and Diamond, that offer varying service levels and value.

But don’t just focus on the time it takes you to complete tasks. Move beyond hourly billing and embrace value-based pricing. This means setting your rates based on your impact on your client’s business, not just the hours you work.

Finally, hone your consultation skills. Instead of a sales pitch, guide a discussion highlighting the value you deliver and how you can help clients achieve their goals.

Remember, the perfect pricing model is unique to your firm. Don’t be afraid to experiment. Track your results, refine your approach, and find the sweet spot that maximizes your profitability while attracting the ideal clients for your business.

Financial Cents can help you grow and scale your bookkeeping firm. With our automation features, you can free up valuable time to focus on building strong client relationships and delivering exceptional service.