Value pricing, also known as fixed-fee billing, is attractive on some levels to both accountants and their clients: accountants, because they get their fee up front, normally at a premium above their time-based billing; and clients, because it provides them with certainty about the services they will receive and the fee they will be billed.
"They don't feel they're being nickled and dimed to death every time they call with a question," said Jason Lawhorn, of Knoxville, Tenn.-based Lawhorn CPA Group Inc.
Yet most accountants are reluctant to actually go ahead and convert their practice into a value billing one, Lawhorn observed. A value-pricing agreement, tied in with an engagement letter, defines the engagement terms prior to starting work, and enhances client perception of the accountant's value, he told attendees at a Thomson Reuters Users' Conference Workshop.
"Clients know exactly what we are providing and how much it will cost up front," he said. The firm knows exactly which services need to be done for the client—each line on the value-pricing agreement becomes a task to be completed on the firm's practice management software.
When Lawhorn switched to value pricing, he met each client individually to explain the new system. "Your biggest fear is they won't like it and will go away," he said. “In actuality, our attrition rate was extremely low. the only ones who walked were those that weren't paying us anyway."
To get started, Lawhorn recommends doing it piecemeal to stay within the accountant's comfort zone. "It's easy for me to say just jump in and do it because I know it works, but very few people feel comfortable doing that,” he said. “So I recommend doing it a step at a time. Get partner buy-in, and develop a menu of services that you can package."
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