TFYW #020 Pricing Tables Are A Barrier to Growth

Jan 27, 2023

This week we’re going to get into pricing tables.

I had a pricing table on my website from day one. Given that I was a cutting-edge virtual firm, I thought I needed a pricing table.

I thought people wanted transparency around service fees, and I wanted to be different from firms that couldn’t offer certainty upfront.

The pricing table included groups of offerings based on volume.

$300 for 50 transactions per month; 

$500 for 100 transactions; and 

$850 for 200 transactions.

On certain tiers, there were additional services included like quarterly versus annual sale tax or foreign currency sales.

These tables made sense at the time, and for many firms these tables continue to make sense.

However, pricing tables are a barrier to sustainable firm growth.

Pricing Tables Attract The Wrong Clients

Pricing tables make sense for defined products, where the value does not have to be explained, and the client’s needs are well defined.

Clients like pricing tables because their cost is clear. It removes any surprises. However, cost control as the top priority usually goes hand in hand with a lack of vision.

Clients who think accountants only help with a defined siloed part of their business (bookkeeping and tax prep) are not clients you can build a thriving firm with.

Accounting firms can only grow sustainably when their clients’ businesses are growing.

If the client is not growing or doesn’t want to grow, it will be impossible to provide advisory or high-margin work. The work may be recurring, but the margins are low.

There is a misalignment of goals. Seeing that accounting does nothing to improve the bottom line, clients will want to squeeze that expense, demanding lower prices. Any increase in that price may trigger the client to find a cheaper alternative.

The ease of landing a client with a pricing table will lead to squeezed margins on services that the client sees simply as commodities to clients.

Pricing Tables Are Not Tiers

Some firms present pricing tables as if they are tiers. This is incorrect.

The sales psychology around tiers allows clients to feel empowered to decide for themselves. If we price tiers based on volume, we have already decided for them.

Their business only has one volume of transactions or sales taxes filing. There is no decision for the business owner to make. If they have 500 transactions, the tier with 500 transactions is the only one that makes sense.

With volume-based tiers, the other tiers are not viable options.

If you don’t remember anything else from this week’s newsletter, remember this:

 

More clients will say yes if they are given three truly viable and applicable options. 

 

More clients will say yes to higher-priced tiers if they see an increase on the ROI between the tiers. 

You should design tiers to show the clients the path to how they can receive more value from the relationship.

Proposals there that offer engagement alternatives on transaction volume are just as useless as a pricing table. Why would anyone pick an engagement level that was not applicable to them?

An actual proposal (after a complete discovery call) spends time to highlight the increased value received when they engage more services. Although generic proposals are quickly fired off to clients, they will be irrelevant and won’t move a client up the value ladder.

Pricing Tables Fixate On Maintenance

As mentioned above, pricing tables work best for productized offerings. The easiest services to define and productize are bookkeeping and compliance. However, a finite offering relies on a business maintaining the current level of activity or revenue.

By completing the bookkeeping or compliance, you are helping a company only with their maintenance – keeping the status quo.

Pricing tables chain you to maintenance work and don’t allow you to offer higher margin (and truly scalable) services.

With Maintenance work, it is hard to highlight any unique value your client will receive. Pricing tables allow clients to compare prices and shop around, so it comes down to what service provider reduces their input costs the most.

It is impossible to define the outcome for every single client in a three-column pricing table.

When you have done a discovery call well with a client, your service will be unique, incomparable, and impossible to put in a pricing table.

What To Use Instead Of A Pricing Table

Pricing tables or any groups of packaged services will put you at a disadvantage. I would avoid defining pricing at all on your website.

Instead, focus on highlighting the solutions you provide in your niche.

Talk about the client, their industry and their needs. Their problems are the gateway to providing high-value, scalable solutions.

Have a great weekend.

Build The Firm You Want!

Mark

P.S. Email Mark@FirmNexus.com with something that you want me to talk about. I’ll add it to the list. 

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