Hourly billing has been the default billing method for accountants for decades. Everything seemed simpler:
The more you worked, the more revenue you generated.
Profitability was easy to track.
Timesheets kept every staff member fully utilized.
However, there are some significant weaknesses in the model.
- You only generated revenue when you or a staff member was working.
- Timesheets were incredibly inaccurate, and full utilization was a myth.
- Long hours burned out firm owners and staff members.
- Revenue was handcuffed to your finite resource of time.
The industry is changing and so is the market’s tolerance for accepting a service before they know what the price will be. Clients want predictability and certainty. Even if it means paying more. Here are the top five ways to build highly profitable and predictable recurring monthly fees.
1. Review Each Service Separately In Your Offer
When finalizing my first subscription model, I did not give it too much thought. I grouped a bunch of services together and slapped a price on them. My prices were based more on what I thought the clients wanted and would pay. I quickly discovered that with a few small mistakes, a monthly subscription could become a serious drain on cash flow. At one point:
I made no distinction between filing monthly and quarterly sales tax.
I did not consider the levels of complexity for corporate tax returns.
I was available to chat at any time with my clients, leading to frequent, time-consuming calls.
I committed to everything that the client requested because my offers lacked clarity and boundaries.
2. Create Three Main Offering Tiers For Clients
There are two main reasons to offer three choices to your clients.
First: People need choices. Giving a choice to the client empowers them. Clients are less likely to say ‘No’ outright if there is a choice in services and prices.
Many apps and service providers offer three choices for the same reason.
Three choices create the needed psychological assurance for the client without forcing your firm to offer numerous service combinations.
The more variation in offerings and services your firm provides, the less likely you can standardize workflows, automations and team member training.
Second: Showing the client the higher-tier services indirectly starts the conversation about adding higher-value services down the road.
Many clients will start with the foundational services of bookkeeping, accounting and tax work. Once they are confident in your firm and the relationship, adding outsourced services is a much easier sell.
By indirectly bringing the additional services, you prepare to bring up the services later in an organic manner.
Moving your client from one tier to a higher tier is the fastest way to increase your average revenue per client.
Remember: As you move up the tiers, do not focus on volume but value of services.
3. Stick To A Clear Set Of Services
Businesses and business models are as varied as the people that run them.
Without giving it much thought, business owners will use workflows, pricing and business models that are outdated.
With a mix of old and new ideas, business owners are often inefficient and resistant to new technology.
Don’t let your client’s workflows or methods dictate the services that you offer them.
Don’t offer to complete obscure services or processes that cannot be systematized for your team.
Your efficiency and profitability are built upon a repeatable and dependable system. Once you introduce unique and one-off solutions for your clients, you will have to recreate workflows, technology offerings, team member management and training.
Defined Pricing Tiers create that list of defined services you will offer. It will become your excuse and guide to deny obscure client requests.
4. Not Tracking Small Charges Can Have a Major Impact
5. Do Not Include App and Tech Costs In Your Base Fee
You cannot do your work quickly and efficiently without the right tools.
Equitable and valuable monthly subscription pricing requires cloud tools to do your client’s work. Do not entertain a request from a client to do work without your ideal cloud tools.
A question that comes up often with my clients is whether or not app costs should be included in the monthly fee.
I initially included the cost of the technology and apps in my pricing. I was getting a discount on the cost of the apps as an accounting partner, so it didn’t seem like a big deal.
But again, those small amounts added up and ate into my profitability.
What you do as a trusted partner for your clients is above and beyond the tools and apps you use.
Ensure that the cost of the tools is considered separately in your pricing model. The cost can be lumped into your monthly subscription fee, but ensure the client knows they are included and at what cost.
The costs of the apps change all the time. By clearly showing the cost of the apps upfront, changes to that part of your pricing can be easily discussed with the client.
Tiered Pricing provides a spot to add each piece of technology needed to service your clients. You won’t be tempted to exclude the cost of the apps and tools when setting your monthly prices.
The truth is, no magic formula will convert each lead to a client. There is, however, a foundational method to create attractive pricing for your clients while ensuring you hit your firm’s profit targets.
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