During the value extraction process, you will identify the problems the client has and figure out what you need to do in order to get them to their desired state.

This is the distance between the current state/problem (A) and the desired state/solution (C), with (B) being the services and the value that it takes for that distance to close.

Whether you are doing services, training, software, or a combination, we are going to look at how to combine these to reduce the amount of work that you have to do to get the client from A to C.

It does not matter how much time you spend working.

Whether results take 2 hours or 25 hours, all that matters is that you bring value.

And when it comes to pricing…

Here’s the rule: No matter what service you are offering, you need to know the specific monetary value and make your pricing ⅓ of that value.

In other words, you want to charge them something that is going to give them a 3 to 1 return on their investment.

And there are some Key Pricing Principles to remember:

• It does not matter how long it takes you. You should price based on the value that is created from your services, not how much time it takes to do the work. If you charge $5,000 an hour, that’s fine, so long as the client receives a 3 to 1 return on their investment. If they are comfortable paying your fees, then they believe the value is worth the price. The ROI is all that matters.

• Qualification is everything. There will be times when you will not know the exact price to charge. In these circumstances, you want to let the prospect know that if you go over your original pricing, you will charge them hourly. Once you have exhausted 50% of the fixed fee amount, you should tell the client that you have gone through half of the fees and there is still “X” percent of work to be done. If they want you to continue, there will be an hourly fee.

• Fixed is better than hourly, but we still use hourly. Many people in the accounting industry only use fixed pricing; however, it is much better to price on the outcome rather than time. When you price on the outcome, you can increase your margins substantially. The goal is to always be moving toward more efficiency without doing more work. When the value is there and it does not take you a substantial amount of time to complete the work, that is the ideal situation. Generally, you only want to use hourly if you go over your fixed budget or you have absolutely no idea how to price a project. Even then, it’s best to perform a diagnostic for a fixed fee and then move to an hourly charge.

• Know your pricing before the strategy session begins. The only exception to this is pricing for training or software sales. For services, you should never know the fees until you have completed your diagnosis and value extraction process. Only then can you find the value. Once you determine the value in the strategy session, you can then determine the investment to work with you.

• Never put pricing on your website. Even if you have a fixed fee for a training program, you want people to talk to you or email you directly for pricing. There should never be prices on your website because this creates allure and intrigue. It also allows you to be flexible and change your pricing over time.

• Pricing is always wrong, so aim high. Do not worry about getting your prices right. Be conservative with your business and make your prices and your value high. This value should be made clear in your strategy sessions and they will buy if they see that value.

• Hourly rates should never be less than $125. While you want to aim for $250 or more an hour, the absolute minimum should be $125. No matter your experience level, this is the minimum. In theory, charging $125 an hour will give you $250,000 a year. However, that would require you to work full time and therefore deplete your time for marketing, sales and other activities that grow your business. Aiming for $250 or higher grants you more flexibility and money to invest in your growth.

• Always refer to your prices as “an investment.” Accounting services are an investment the moment someone decides to work with you. Avoid words like “fees,” “price” and “cost.” During strategy sessions, always emphasize that your work is an investment.

• You want to do the least amount of work possible. When you learn how to price on value, you’ll then determine how to do the least amount of work to create that value. The more efficient you become by reducing service delivery time, creating supplemental training, and using software, the more profit you will inevitably make.

These are the key principles that you should remember for pricing any services you decide to perform.

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