Has anyone tried software called Pricing In The Cloud? I just watched a webinar by its creator, Mark Wickersham, and it looks interesting.
Whenever I look into "value pricing", all I find is advice about sales, marketing, and the importance of value pricing, but no information about pricing.
Supposedly, this software addresses that.
-- Edited by TMe668 on Tuesday 26th of January 2016 06:01:17 PM
The whole concept that pricing is not based on time is flawed but it doesn't stop people trying to push it as a new idea.
All work is based on time. If we offer fixed fee's we still base it on the time that it will take.
The author of that site is regurgitating tired old ideas as something new but there is in reality very little now out there that is new, just a lot of things that people have not discovered yet.
The concepts being discussed here are a mix of Ron Bakers study "Burying the billable hour". Here's the ACCA version of it "www.verasage.com/wp-content/uploads/2000/01/bury.pdf" combined with something reminisent of Kris's menu pricing.
The wrapping on the site is that its (a) trying to sell you something and (b) put the cloud accross as being the go to solution for accountants and bookkeepers.... I think that most of us are getting pretty immune to that sales patter now and are capable of making our own minds up as to whether we consider cloud options a move forwards or not.
I'm not knocking those who do, each to their own.
Enjoy the above link and you will see that even Ron Baker states that one cannot simply take time out of the equation.... Got to go out to a clients now. Back later.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I'm interested in "value pricing", but I'm skeptical. It seems everyone who pushes that idea has a problem with numbers. They don't have any. I might take a look at this software, if only because this is the first time I've heard an advocate of value pricing who is actually willing to provide any data, of any kind, instead of just giving advice about how to be a better salesperson.
For pricing, it basically uses "per transaction" fees to come up with a price.
For presentation, it looks great. If I were using transaction fees as a basis for coming up with fixed prices, I'd love this as a sales tool.
But... the sample data that comes with the software is not very good and there isn't a lot of it. So you'd need to know already what your transaction fees are. The method for calculating the final price doesn't look great either, but it can be customized easily.
So... if you're already using "per transaction" fees as the basis for coming up with a set price, and you already know what you want to charge and how you want to calculate it, the software could make a great sales tool. Otherwise, it's hard to see the value.
I am a member of AVN, the company that Mark Wickersham is involved in.
I am a basic member and get use of another software tool, Times Up, which is basically a piece of software that prices for new clients which you use when you initially meet them. I have set it up with my settings in the background and have already used it on about half a dozen new clients when meeting them for the first time and giving them a price. What it does is gives clients a choice. If they want to go for the basic package they can but if they want to add extras eg us acting as registered office, us doing the bookkeeping, us doing the VAT returns, us doing tax planning etc then they can see the price and decide what suits them. What I have found is that I am getting higher fees compared to using my original methods. I also get use of other software called incorporation planner and remuneration planner but not had a look at them yet. (job for next month).
I am going down to AVN headquarters in Barlborough next month for 2 days training on their software then going down again at the start of March to go on their 3 day masterclass. I went last Sept and want to go again as interested in investing in what they offer. I have spoken to a lot of our bigger clients and they say that the growth programme that they do is what they are looking for. That would generate substantial additional fees for us for us each year. (probably £50k - £100k for about £10k investment).
Mark went over the pricing in the cloud software at the masterclass and i have had a look at it briefly and will be looking at it in more detail over the next few months. Again it is a pricing tool for clients that if you have the glossy brochure and have it all set up properly could generate good additional fees.
Of the back of the AVN course last year I gave client different choices for setting them up on Xero, giving them 3 x 2 hour training sessions and ongoing support. They went for the middle package of £1500 + VAT. I would have probably quoted about half of that before using their techniques.
As AVN explains services that accountants provide, I am coming at things from the accountants angle rather than the bookkeeper angle, there isnt a market rate. If there was then all accountants would charge the same price. But AVN shows there are wide variations in what firms charge for basically the same service. eg they show example of firms acting as registered office for clients can charge between £0 and £540 per year. If there was a market rate then everyone would be the same. Why do people pay different prices. It is due to the value they perceive to be getting.
If we are doing a mortgage reference for a client it is valuable to the client as without it they may not get a mortgage. if we charged based on time it takes us to do we would probably charge £20+VAT. But we can charge up to £150 + VAT depending on the value to the client. We charge for setting up Ltd Cos at Co House, registering online for VAT, payroll and self assessment. If we charged based on time we would charge probably £5+VAT for each but we charge £75 + VAT for basic set up of a Ltd Co and £60 + VAT for each of the online registering services. Again it isnt the time it takes us but the value the client perceives for it as; they will need to spend time researching how to do it, they will then need to physically do it, then need to hope they do it correctly. We take away all the hassle.
Had a client today that had a tax return that is due for the month end. They could have done it themselves but they told us to just take away the hassle of doing it. Took us 15 mins to do, charged £120 + VAT.
Strictly speaking, the software doesn't really use "value pricing". It uses "menu" pricing. When setting up the software, you figure out what you want to charge for each type of service and enter that. Then you factor prices for different things, charging more or less for different types of clients, etc. The software then spits out prices for different price offerings with different levels of service, and offers upsells. It's a very analytical approach to pricing.
Value pricing isn't about market value. It's about "perceived value". It's about sizing up the customer and figuring out how much you can charge. To put a negative spin on that, if I do some house painting that has a market value of $2,000, but I charge $15,000 because my client doesn't know any better, that's not "perceived value", that's fraud. To put a positive spin on that, I have a friend who does a lot of tax work for individuals. He asks "What's it worth to you?" and nine times out of ten, that's what he charges. That's value pricing, and everybody's happy with it.
I think part of the value of this kind of software is that when you produce a fee it is almost like it is the official price because the computer has spat out a number rather than the accountant 'umming and ahhing' and coming up with a ball park figure. As Mark has discovered it can double the fees without too much argument and again as Mark says, if there is a bit of dissent you don't have to lower your fee but take something out of the package.
Charging higher isn't fraud, ripping someone off is unethical. If you do a job for the agreed price at the agreed quality, well that's just business. There are hundreds of accountants and bookkeepers and clients often shop around but price isn't the most important consideration for most clients.
Charging higher isn't fraud, ripping someone off is unethical. If you do a job for the agreed price at the agreed quality, well that's just business.
Different industries have different standards. Where I am, there is an upper limit to how much building contractors can mark up their costs before it's considered fraud, which is why I chose that example. A recurring scenario is where a crooked contractor charges a senior citizen 10 times what's considered a reasonable price. But that would be for the whole job, not a particular piece of the job.
We have different ethics based around integrity, objectivity, independance, professional competence and due care, confidentiality and professional behaviour. There are also rules linked to those associated with marketing professional services, fee's, gifts, litigation, custody of client assets etc.
For Fee's which is the one that you single out I think that S240.1 sets the tone :
"When entering into negotiations regarding professional services, a professional accountant in public practice may quote whatever fee is deemed appropriate. The fact that one professional accountant in public practice may quote a fee lower than another is not in itself unethical. Nevertheless, there may be threats to compliance with the fundamental principles arising from the level of fees quoted. For example, a self-interest threat to professional competence and due care is created if the fee quoted is so low that it may be difficult to perform the engagement in accordance with applicable technical and professional standards for that price."
So quite the opposit to the situation that you identify in that accountants actually must not charge too little as it would be unethical not to charge the true value of the work to be performed.
Now, there is an arguement from the other perspective as well, not in that one charges too much but rather the amount that you charge may be too high a percentage of your overall income so your objectivity may be perceived as compromised (i.e. if one client is paying 50% of your firms fee's then perception would be that they control you because they are too important to lose rather than being able to walk away from any client when necessary).
The rules are that after one has been in practice for two years no client should account for more than 15% of firm income. Between 10% and 15% the firm would need to put controls in place to ensure that integrity and objectivity could not be questioned. Under 10% of income for non public interest companies one should be ok although matters affecting objectivity are not restricted to financial dependance.
So, the size of one's firm does really dictate the size of the clients that one can service. Plus, charge a client too much and you may risk that client going over 15% and if they do you need to give them to a fiirm that can handle that size of client income without their integrity being questioned.
Fraud does not come into it at all. Its all about integrity (real and publicly perceived).
-- Edited by Shamus on Thursday 28th of January 2016 09:55:16 PM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think part of the value of this kind of software is that when you produce a fee it is almost like it is the official price because the computer has spat out a number rather than the accountant 'umming and ahhing' and coming up with a ball park figure.
I agree. It looks like a great sales tool, but only if you're using menu pricing and you've already figured out your numbers.
There is an element of "value pricing" in that you can apply different markups for different clients. By default, the software shows different markups for different industries, but there's no reason you couldn't charge a different markup for each client.
