Understanding how to price advisory services
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- Practice management
- Public practice
This article was current at the time of publication.
When Auckland-based practice DVA began offering bespoke advisory services like business planning and restructuring, the value they created for clients outweighed the fees being charged.
“Putting a price on value represents quite a change for a lot of firms because most are used to just capturing their time and sending a bill at the end of the month,” says DVA managing director Matt Vincent CPA.
“The tipping point for us was gaining a good understanding of the value we were leaving on the table and the value we were giving away for free.”
If you aim to become the trusted adviser for a clients' business, the value should be based on your financial expertise, not time.
Putting a price on knowledge
Value-based pricing correlates the cost of a specific service with the benefits it affords a client, rather than what it costs to deliver. This encourages a deeper relationship with clients as the more you know about their needs, the more value you can add.
Also, with technology automating many compliance tasks, the traditional hourly rate structure is being challenged.
Putting a price on advice
Determining the price of advice remains a sticking point for many accountants. Vincent says the first step is calculating the value your services deliver to clients. He uses a simple exercise when encouraging his team to switch focus from output to value creation.
“The price we charge for a GST return is not significant, but it is value-based,” he says.
“I ask my team what’s in it for the client. How much of the client's time do they [save] if we do the return for them?
“What can they do with that time in terms of investing it in their business or spending it with their family? What's the peace of mind value they’ll have knowing the GST return is correct? Where many accountants just see a GST return in front of them, process it, and send it out, it actually carries a lot more value than what they may perceive.”
More complex services
Advisory services such as restructuring can present even more tangible value, Vincent continues.
“We did a significant restructuring project for a client that protected their assets and piggybacked tax savings of about $60,000 per year. That job was priced at about $20,000 and the client didn’t bat an eye.
“If you clearly articulate the value they’re getting for what they’re spending, clients are much more receptive to value-based pricing. The issues come when we haven't articulated the value, then they get the bill and it’s like, what's this?
“We try to be proactive whenever we’re engaged by [quoting] the client a price and [explaining] the value before we start the work.”
Choosing a pricing structure
Value-based pricing structures will differ depending on your practice and clients.
While a monthly retainer could be suitable for large clients requiring a greater depth of service, fixed prices may be attached to certain services any client can access.
Another method is to group services into bundles – such as “gold”, “silver” or “bronze” – and charge a set amount based on the value they bring. The price is fixed up-front, so clients know what they’ll be paying.
Sheilana Prosper CPA, principal of New South Wales-based Grow & Prosper, recommends being transparent with pricing. She offers service packages from “Essential” to “Comprehensive Plus”, with prices scaled to what’s included.
“I have the pricing on my website and I know my competitors do too,” Prosper says. “If you are going to step outside that pricing boundary, have a really good reason. Is it because the client is going to have a dedicated person on their business, for instance."
Vincent agrees that flexibility should be built into the pricing.
“I think a lot of clients like tiered pricing structures because it gives them certainty about what they’re paying for,” he says.
“The benefit for accountants is that it allows them to capture the lead, get them in the door and then tailor it to customer needs.”
However, Vincent says that tiered-pricing structures also risk “scope creep”.
“If your team hasn’t a clear understanding of exactly what the client is paying for, scope creep can be a very real problem,” he emphasises.
“There’s also an administrative component around rolling those service plans through every year and, if something changes in your service offering, there’s the administration of being in contact with clients about it.
However, he says there are good tech tools to help with this, like Practice Ignition or a customer relationship management system such as HubSpot.
Knowing your value
At Sydney-based Knight Partners, a “PBRR” approach is used for advisory work with a clear pricing structure included.
“It stands for planning, budgets and regular reporting,” says the firm’s director, Peter Knight FCPA.
“We have a brief planning session with clients, prepare the budget for the next 12 months and then run regular reports each month,” Knight explains.
Price starts from $195 + GST per month. This is on top of their Basic Pack, which includes their BAS and year-end tax compliance.”
For accountants seeking to introduce value-based pricing, Vincent recommends undergoing training to learn how to prepare proposals and taking time to understand the value that your services present.
“As you start to have more project work come in, you can then create a value price around that,” he says.
“Think about things like how much tax can you save your clients and the value of their assets that you’re helping to protect.
“It takes a while for change to happen, but once it starts to become part of your DNA, you can push it through your organisation.
“A lot of what we do here is help clients grow their profit or increase their cashflow. For example, if we can show a client how to improve their profit by $10k to $20k, then spending $2500 on a half-day business planning session with us is value for money.”
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