As Martin White from Jacoby Cameron Chartered Accountants explains, if you don’t get your pricing right, your bottom line could suffer.
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Accounting firms who are moving into the advice space may be tempted to offer discount pricing to attract new business. It’s an understandable approach — but be warned. Putting a bargain price-tag on your services can lead to poor outcomes for your business in the long run.
Know your worth
The Jacoby Cameron team have been offering advisory services since 1998, but arriving at a suitable pricing structure didn’t happen overnight. Before long, they realised they had underestimated how much it was actually costing them to deliver advice.
“At one stage, in some cases we were pricing our services at 50 per cent of what they were costing us,” White said. “So the first thing we did was look carefully at how long we were really spending on every task. Then, we were able to work out a price for each piece of work accordingly.”
By tracking how long it was taking them to complete each part of the advice process, the team were able to better estimate their timing for future jobs — and their pricing — more accurately. It has also meant they can explain their pricing system to clients more easily.
“Some of our clients have questions about our pricing or want to know how it’s changed,” said White. “Now we can clearly show what we’re doing for their money and how we’ve arrived at that price.”
Explain the value
For firms offering their accounting clients financial advice for the first time, the pricing conversation can be smoother if the client understands the potential benefits they’ll gain.
“The first thing we discuss with clients is the different between tax advice and financial advice,” White said. “Since we’re already familiar with our clients’ financial position and they trust us, the next logical step is for us to advise them on things like their investments and insurance.”
Educating clients also means ensuring they understand what the advice process actually involves.
White explained: “Some SMSF clients think our role is just to put together a portfolio of shares or managed funds for them — but we help them realise it's much more than that. For example, our advice might be around changing their cash strategy so they can better manage things like fees and pension payments.”
Look after your business
According to White, when clients realise how much work goes into the advice they receive, they feel more comfortable about their fees they’re being charged.
“We’re not interested in being the cheapest — we want to give quality advice,” White commented. “So it’s important that we can talk through what they’ll need to pay to achieve the outcomes they’re looking for.”
Of course, if you do need to adjust your pricing, some clients might not be so understanding — regardless of whether you can justify the price increase. White says that in those cases, you might need to let the client go.
“For legacy clients who were originally paying very low fees, it was challenging to start charging them more — even though their fees now more accurately reflect the value they’re gaining from the advice,” he admitted.
“We explained to those clients the time factor involved, and stood firm with our new pricing. Not everyone was happy with that and, unfortunately, some clients moved on. But we knew it was ultimately the right decision for our business. We’re now comfortable that we’re delivering quality advice and being adequately rewarded for our time, effort, and the care we provide to our clients.”