Pricing based on billable hours is the norm, but growing firms are letting it go. Attaching prices to time leads to burnout, is incongruous with the needs of the workforce and limits earning potential. There are only so many hours in a day, and it sends the message that the amount of time spent on a project determines the value. The value of the deliverable to the client is based on the impact it will have, not the effort you put into the work. Here are a few alternative pricing models professional services firms can consider to make more money and keep employees happy.

Buyer Types

Before setting your rates, it’s important to consider the ways that people shop for services. Certain buyers will see your services as a commodity, making their decision based on price, rather than the value your firm could provide. Commodity buyers are price-sensitive and will be looking for ways to distinguish your cost from the options they are considering. Value based buyers may also be price-sensitive, but will be more interested in the value the engagement will bring them. They may be willing to spend more if the value of the service is clearly articulated. Working with both of these buyer types can be profitable, but they need to be served differently and you may need to package and price your offerings differently depending on the buyer type you are trying to attract. 

Packages

Offering packages has benefits for your firm and your clients. Packages provide pricing transparency, give clients options, and make it easy for your team to sell and execute your services. There are several ways to offer packages, but the idea of bundling services or deliverables for a set price works best for services that are fairly standard. The variation in price will likely be based on  complexity, frequency or a client’s desired level of access to you. Services that could be packaged might include tax returns, standard estate planning documents, small business payroll, and bookkeeping.

• Tiered Packages- Three to four set packages that allow you to offer the right size service for each client.
• Points- Allow clients to customize their services within the parameters of the packages. Different services or projects have different points values, and can be an appealing option for clients who want customization or flexibility.
• Subscriptions- Just like a Netflix subscription, firms that offer subscriptions are offering a certain amount of access to products or services. The client can engage as often or infrequently as they choose within the parameters of the subscription.

Tips for Creating Packages

• Develop pricing based on averages to ensure your costs are covered and profit margins are achieved. The trap is to start going rogue with a la carte add-ons. Remember, your client can always go up a tier if they need more.
• Work with your staff so they understand what is included at each level and what is not. This will save time (money) and frustration on both sides over the course of the entire relationship from the sales conversation through the service engagement.
• Packages are not only for commodity buyers. You can attract value buyers with packages that promote your advisory role. This is where you leverage your decades of experience-  you know the answers and the answers have tremendous value for the client. For example, only take on tax returns with bookkeeping so the books are updated for advisory and clean at year-end. It deepens the relationship with your client and ultimately makes your job easier when things are done right.

Value Pricing

Some people think value pricing means offering a price higher than what it would cost if you billed by the hour.  More than that value pricing is about tying your fees to the impact you have for the client. Going the value pricing route is a bit more sophisticated and not right for every firm or every prospect. However, when a prospect does recognize the value you can bring them, and they are willing to spend for results, you may have found your ideal client. In time, as you attract more of these clients, the conversations and sales process will become simpler as your prospects have more in common.

Offering value based pricing starts with a conversation with the prospect. You need to uncover the goals and the vision they have for their business, the obstacles they encounter and the solutions they have already tried. Think you can help them meet their goals? Value buyers are looking for a professional who can give them an edge. They are paying for knowledge and experience. You have to gain their confidence before you start talking about pricing.

Once you determine you could serve this client, it’s time to create a custom proposal aligning your services and the value you can provide. Now, remember the package pricing tips from above? That logic comes into play for value pricing as well. People like options. Create three options, starting with the highest and then peeling away work as you offer lower cost options.  Don’t forget, when it comes to determining prices for each option, focus on the value of your services and the goals you will help the client achieve. Fight the urge to assign prices to tasks, time and deliverables.

Conclusion

Adjusting your pricing model is one change that can have a significant impact across your firm. It will impact your bottom line, your sales process and how you work with clients. Let’s talk about how your pricing strategy can work better for you. Contact me anytime!