pricing, fees & billing rates

they have to be on board before clients.

by august j. aquila

once you have decided to adopt an alternative pricing philosophy, what do you do next? changing your firm’s pricing philosophy is really a three-step process.

more: when to use 11 alternative pricing methods | 12 subjective factors for pricing your next engagement | how utility and value affect pricing | the four phases of service life | marketing orientation is what firms need
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first, you need to consider several factors before suggesting a change. second, you need to get your partners to agree that it is a good idea, and third, you need to educate your clients so that they accept and understand the new approach. the steps are not easy, but they are possible. and, remember, change does not occur overnight.

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plus why.

by august j. aquila

there are many ways to price professional services. alternative pricing methods in the legal profession have received much more attention than in the accounting profession. in fact, entire publications have been issued by the american bar association on this particular topic.

more: 12 subjective factors for pricing your next engagement | ethics question: commissions and contingencies | how competitors drive pricing | what we know about pricing strategies | when hourly billing hurts profits
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i am aware of at least 14 different approaches to billing that attorneys can use under different sets of circumstances. obviously, each method has advantages and disadvantages as well as marketing and operational implications. i maintain that several of these methods can be used by accountants and consultants in accounting firms when pricing their services.
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standard rates too often leave you short.

by august j. aquila

accountants face only two major restrictions in determining their fees – the restriction against contingency fees under certain circumstances and the taking of commissions or referral fees. we have also seen that for the most part, accountants bill their time based on a cost-plus method.

more: ethics question: commissions and contingencies | make the value curve work for you | how to leverage demand in your pricing | make the most of your marketing mix
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we don’t have to go far to find a source that suggests “that no business can survive and grow in the marketplace unless it is profit-oriented and motivated,” and “time charges at standard rates should only be the starting point for determining the amount to be billed. the real criteria is the value of the service to clients.” the source for these words of wisdom is none other than the aicpa management of an accounting practice handbook. the handbook goes on to say that “standard rates should not represent a maximum that can be billed for services; rather they should represent a minimum.”
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follow the standards.

by august j. aquila

in the old days you could go into a shoe store and purchase sneakers or gym shoes. nowadays, there are tennis shoes, running shoes, cross trainers, aerobic shoes, basketball shoes, soccer shoes and the list goes on and on.

more: make the value curve work for you | how utility and value affect pricing | the four phases of service life | marketing orientation is what firms need
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perhaps the billable hour paradigm soon will go the way of the gym shoe. accountants need to realize that in pricing their services, one pricing method will no longer do. as with athletic shoes, accounting and consulting services can be priced in many different ways.
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does your position match client perception?

by august j. aquila

there is a completely different way of looking at value and it is tied into the type of accounting or consulting work that is available in any given market and the type of accounting or consulting work that your firm provides. thirty-plus years ago william c. cobb wrote “the value curve and the folly of billing-rate pricing,” providing a great deal of insight into the concept of pricing and value. many of the ideas that follow are based on cobb’s article.

more: how competitors drive pricing | how to leverage demand in your pricing | the four phases of service life | what we know about pricing strategies | make the most of your marketing mix | marketing orientation is what firms need | when hourly billing hurts profits
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in discussing legal services, cobb notes that sophisticated clients do not tie benefits to hours. rather, there are certain types of services that have a significant impact on the client’s business. the key words here are “sophisticated” and “impact.”
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