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Steve Major joins Mike Michalowicz, Chris Curran, and Ron Saharyan to tell us all how to dump the timesheets to make our accounting practices more profitable. Welcome to Episode 16 of the Grow My Accounting Practice Podcast!
Steve Major CEO & Founder of Pricing Power. Steve is a Chartered Accountant (Australia -same as a CPA ) who ran his own practice for a number of years. In his firm he did not have timesheets and implemented value pricing. Upon selling his firm he created Pricing Power to assist professionals the world over to build amazing firms of the future. A firm of the future don’t have timesheets, implement value pricing and provide real value to their clients.
Have you ever found an accountant that loves filling out timesheets? No! It creates a whole set of behaviors inside firms of any size because it focuses on making you equivalent to a machine. You have to remember that a timesheet in it’s history comes out of the ford motor company for time in motion back in the early 1900’s! It doesn’t take into account the reality of what an accounting firm or law firms are all about. Pricing needs to be upfront based on the value that the customer sees and that we’re happy to provide the services on that price.
Before the concept of timesheets they just worked out the outcomes that the customer wanted; it was about accountability and not utilization. It was about an understanding that knowledge work and insight is judged in the results that you’re creating, not in a 6 minute increment. Pricing was determined based on an assessment of value. The professional would sit down with a client at the END of the job and they would negotiate a price of what they each think it was worth – the mistake is doing this at the end which allowed timesheets to enter the picture.
Many firms have a reasonable amount of structure and systems and place, but you have to start with the customer first; have a value conversation and give the customer a proposal; give them 3 options, set the price and set the scope.
If you a client that’s draining you of all your time, you need to take action: re-negotiate your price or fire them.
The Psychology of the Sale: Comparative Pricing
The order in which your service packages are being displayed; if you have 3, for example bronze (cheapest), silver(middle of the road), gold (most expensive). However, presenting them in this order is wrong! Why? Because we are conditioned to see the first offer as more and therefore to turn it down. So if your potential client is hearing the cheapest option first and thinks it’s a lot, imagine the anxiety they will feel when you offer the 2nd and 3rd packages at higher rates. Psychologically they’re feeling pain throughout the whole process. The fix? Switch it around. Offer the gold package first… that needs to be 1 to 1.5x higher than your middle package. Their reaction will most likely be “There’s not way I can afford that.” Then offer the middle package which will sound much more reasonable. Finally when you offer the cheapest package, they will show a sign of relief and are more likely to say “Okay, I definitely can do this one.” You want your pricing for the middle packaging to be the amount that you’re comfortable providing your services for – that’s the package you want them to commit to.
GMAP Now Task: How to Get to Value Based Pricing
- List all of the services you provide.
- Circle the tasks that you do the majority of the time, no matter how small (the 80/20 rule: 20% of what you offer you do, repetitively, 80% of the time);
- Start your value based pricing based on these tasks; because when you come up with a package price for that, 80% of the business you provide is now covered! Don’t worry about converting you’re entire company all at once – just work with the core tasks for the most effective start.
Nextiva – VOIP phone providers for small businesses.
Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.
TSheets – The #1 customer rated time tracking solution!
Fundbox – the simplest and fastest way to fix your cash flow by advancing payments for your outstanding invoices.
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