The Future of Value Pricing – What Lies Ahead?

You may have heard some talk about value pricing – the notion of selling a commodity at a perceived value.  It’s been reaching a lot of mouths in recent years among the accounting industry, particularly in certain circles.

Recently, the good folks at Thriveal CPAs (“Accounting for the brave”) held their annual Deeper Weekend in Greenville, South Carolina.  In their live podcast from the event, Thriveal compadres Greg Kyte and Jason Blumer discussed their biggest takeaways from the event, and asked some of the attendees what their biggest takeaways were, as well.  And much of the conversation focused around value pricing.

It’s an idea that’s seemingly gained leverage among small to medium-sized firms.  After all, they’re more likely to have the size and independence from standard convention to experiment with alternative pricing structures.  But could this diversion from the billable hour ever exist in a larger firm, thereby spreading to other larger firms, eventually becoming the industry status quo as it presumably moves to the Big 4?

Here’s what some of the Deeper Weekend attendees had to say.

“Our biggest enemy is probably ourselves.  We always think in numbers.  Let [the client] make the [pricing] decision, not us.” – Jason Miller, Software CPAs

“I’m going to raise prices because my value is so much higher than what I’ve been charging.”- Nesha Pai, Pai CPA PLLC

“I don’t think a lot of [accountants] [believe in themselves].  I think a lot of them fear confrontation.  They fear that the client is gonna reject them on the basis that they’re charging too much…but accountants aren’t taught to communicate how they actually bring that value, how they save the tax.  We gotta believe in ourselves, and actually know that we’re worth it.  We are worth the fees that we charge, and the clients do get their money’s worth out of us.” – David Rynne, Real Time Accounting

“Selling is emotional all the way through.  The value is sustinent on the emotional components and all the things you’re gonna deliver, and the value they’re gonna get, and you’re a sub-amount to that value, as well.” – Ian Vacin, Karbon

“I’ve been practicing value pricing for many years.  I was reminded again of the high value that I have to help another human walk through some type of change process.  I’m learning that it’s probably about time to raise our prices pretty significantly to reflect the value that I know we can give people.” – Jason Blumer

There’s a lot of great ideas here.  To start, value pricing is advantageous for a firm because it assigns a price based on the value of what the client is actually getting and how they will gain from it, and not just how many hours the accountant worked.  If you focus on hours worked, then the deliverables, regardless of how much they help the client to succeed, are produced at a fixed rate.  Nothing more, nothing less.  On top of that, there’s the uncertainty of it – you don’t know how much time the CPA will spend on your account, therefore you don’t know how much the transaction will cost.  It might be okay for your mechanic or plumber to operate in that fashion, but where your business – your mode of daily living – is concerned, do you really want to put your accounting professional to work not knowing how it’ll ultimately affect your bottom line?

Further, if an accountant assigns a price based on their perceived value of their work, it helps them to truly realize the extent to which they’re helping their clients, and how their clients will thrive because of their work.  It can be tricky to begin with, however, as some accountants might not know how to determine their true value, sometimes out of an inability to quantify it, and sometimes, as David Rynne said, out of fear.

But the thing is, the perception begins with the accountant.  Once the accountant sets the value-based price and sticks to it, the client will embrace that price as the true indication of the accountant’s worth.  The client won’t do it for the accountant unless the accountant does it first.  And Greg Kyte offered an interesting tip for value pricing rookies.  He suggested going after certain clients only if the accountant is established enough to assume potential risk if push comes to shove.  “If you already have a book of business, and it’s more or less stable, and you’re paying the bills, that’s when you can go to a new potential client and f-around with them.”, he said.  “You can go, ‘How about I highball this guy, and see what happens?'”

As I stated before, small and medium firms have the luxury of being independent enough that they don’t have to worry about the imposition of institutional demands.  But what of the future – 5, 10, 20 years down the road?  Can professionals in larger firms successfully implement a value pricing strategy with their clients?  It’s certainly never been done before, as far as I know.  And in all honesty, hourly billing seems to be the system most compatible for a mechanized corporate structure present in large firms.

But let’s look back to what the Thriveal people said.  Value pricing, for all intents and purposes, is based on emotion.  Its bases lie in how the accountant feels about what they do, and how the client feels about the accountant after their work is done.  When both parties embrace their feelings, for lack of a better way to put it, that’s when the value of the work increases, and the value of the relationship becomes its absolute best.  Then again, many firms depend on the billable hour to create steady revenue for the firm and keep their professionals on the clock to make sure they’re being maximized as much as possible.  So the question remains, can larger firms find a way to determine pricing based on value in a way that won’t compromise their bottom line, their professionals’ happiness, and available hours in the day?

Hard to say for sure what lies ahead.  But it’s awesome to know that some of us are understanding that the work we do has greater meaning than a paycheck.  As the business world changes in scope and newer generations move through the workforce, and accountants are on the pulse of it all, I’m excited to see what new developments take effect.  There are people such as those from the Thriveal crew that unleash their full potential by embracing a pricing system structured on value, and in doing so, they may be planting the seeds for the profession’s future.  A future in which people and services are more than commodities with a fixed dollar sign attached to them, and their knowledge of this enables them to work and pursue relationships at their maximum potential.  And once that happens…who knows what amazing things we can achieve.

I hope you agree with me when I say it’s certainly something to look forward to.

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s