Art of Accounting: Pricing by the Hour
IMGCAP(1)]When I was starting out I read a number of books by master salesman Elmer Wheeler, who said, among many other things, “Sell the sizzle, not the steak.” This left me with thoughts of always telling clients, or whoever I interacted with, about the value and benefits of dealing with me while de-emphasizing the cost.
About a month ago I received a call from the landscaping company that mows my lawn, puts down the fertilizer and does some other stuff. They wanted permission to “winterize” the lawn and said it would cost $55 per hour.
I asked how many hours it would take and I was told “one.” I asked how many people and was told “three.” I asked what would happen if it took longer than an hour and was told I “would be charged only for the extra time in quarter of hour increments.” I then asked about the benefits and was told “it would winterize the lawn.” I then said, “No thanks.” And then I thought about it.
First of all, this could not have been the first time they ever winterized a lawn, so they should know pretty well how much time it would take. They also have been cutting my grass for a few years so they should also know how many people would be needed and also how much time it would take. And then they should have given me a fixed price.
For a cost of $165, $200 or even $250 or possibly $500, I certainly would have given the OK without thinking twice about it. For those amounts the value was certainly there (even if I could not visualize what “winterizing” meant). Further, the benefits or value were never clearly explained to me.
Now, how do accountants quote fees? I do not believe clients like open-ended vague pricing. A fixed fee negotiated beforehand based on the value to the client seems to me would work best. I also think that many times we fail to get buy-in on the benefits and value to the client, and that is because we neglect to look at the project from the client’s point of view.
Needing an audit report for a bank or tax return for the government is not a benefit. It is what we must do for the client who must have it. The benefits and value are what distinguishes one provider from another. Clients assume we will use proper care, are knowledgeable, that the right procedures will be followed, and that the deliverable will be completed on time and will be acceptable to the third party recipient.
What do we do that creates added value? If nothing, then we are performing a commodity service, and if we want a happy client we should be the lowest-cost provider.
I know my firm adds exceptional value on everything we do, including so-called commodity services, and we are able to convey this to our clients so we get the assignments at the right fee. I have been working on this for years selling the benefit, not the hours it takes.
Sell the sizzle, rather than the steak.
My next column will present two dozen value-added benefits that can be provided to clients on every engagement.
Edward Mendlowitz, CPA, is partner emeritus at WithumSmith+Brown, PC, CPAs. He is the author of 24 books, including “How to Review Tax Returns,” co-written with Andrew D. Mendlowitz (published by CPATrendlines) and “Managing Your Tax Season, Third Edition” (published by the AICPA). Ed also writes a twice-a-week blog addressing issues that clients have at www.partners-network.com. Art of Accounting is a continuing series where Ed shares autobiographical experiences with tips that he hopes can be adopted by his colleagues. Ed welcomes practice management questions and can be reached at (732) 964-9329 or email@example.com.