13 Pricing Models to Consider to Transform Your Profits - Part 2

In my last blog post, I explained what a pricing model is and took you through the first 6 of 13 different pricing models that you can apply to the accounting and bookkeeping profession. Now, I’m going to take you through pricing models 7 to 13 and start digging into the really valuable models.

Check out the full video on this topic by clicking here.

#7 – Percentage pricing

Another pricing model which is more useful in the accounting profession is percentage pricing. This is where we charge the client a price which is a percentage of the outcome.

This is something we see a lot in real estate – if you’re looking to sell your house, the realtor or estate agent's price is often a percentage of the sale proceeds.

This is a form of value pricing because both you and your client are on the same side, you want the same outcome. The better the result you can get for the client, the higher your fee will be.

A common way this is used in the accounting profession is with tax planning.

#8 – Fixed price plus… Contingent/Percentage

We can combine different models to create new models, a common combination being a fixed price plus contingent pricing, or a fixed price plus percentage pricing. We may charge clients a fixed fee for a service and then add on a contingent fee or a percentage fee on top of that.

The fixed element means that at least we always have our costs covered, which makes it preferable to a straight percentage or contingent pricing model. However, from the client’s perspective, they have a cost when they might not get the result so they would prefer a straight contingent or percentage pricing model.

#9 – Equity participation

This is one to use with care. If you do things like consulting work or business advisory, you could go with equity participation. That’s where instead of charging the client a fee for the project, you take some equity in their business. This is something we see on TV in the UK with ‘Dragon’s Den’, or ‘Shark Tank’ in the US.

There are a lot of downsides and risks with this model but it’s an option that might be worth considering in some special cases.

#10 – Menu pricing

Now we’re starting to get into the pricing models that I think are certainly worth considering. Menu pricing is something I’ve been teaching for 20+ years.

As I said earlier, if you give someone a single fixed price, that’s cost-plus pricing, and it’s always going to be the wrong price, either because it’s too high or too low. What we aim to do with value pricing is to price somewhere close to the client’s maximum willingness to pay, or as economists call it, the buyer's reservation price.

If you price a service at a set $500, there are clients who don’t see much value and would only pay $250 who you then lose out on, and there are clients who will see lots of value and would happily pay $1000 meaning they get a bargain and you leave money on the table. Everyone is willing to pay different prices as they value things differently.

One way to get closer to each client’s maximum willingness to pay is to use menu pricing. Rather than presenting a single fixed price, we give people choices. Think of it as Bronze, Silver and Gold. If you don’t give the client the option of choosing a higher package, they can’t pay you more money for the things they want and value.

#11 – Bespoke quotes

Bespoke quotes mean every client gets a different price that’s tailored just for them. This is the best way to price.

The way this is done is to sit down with the client, ask great questions to get to understand them and their needs better, then present the client with different options and involve them in the pricing process. The more a client feels in control of the process, the more stuff they buy and the more they will spend with you.

#12 – Retainer

Number 12 is a retainer pricing model. This is where clients pay a fixed amount every single month to have access to you. You might still have another pricing model on top of this to price your services, but simply to be a client of your firm there is also a monthly retainer to pay.

#13 – Subscriptions/Memberships

The final pricing model that’s relevant to the accounting profession and that really takes value pricing to another level is the use of monthly memberships or subscriptions. There are so many opportunities here if you can get creative.

When we work one-on-one with clients, that’s not scalable because we only have so many hours in a day. So if we start thinking creatively, are there ways that we can scale our firms to work with clients one-to-many? Because we’re in the knowledge industry and we have so much knowledge to impart.

A great example is to start an online business club where you get business owners together every month and teach them something valuable, and where they can also network and communicate with other like-minded business owners. That’s then scalable because it takes the same amount of effort from us whether we’re teaching one client, 10, or 100 clients. That’s a monthly membership.

And if we take this to another level still, we can think about how we can turn our business into a subscription model. Subscriptions are incredibly popular these days if you think about services like Netflix, Amazon Prime, Spotify etc. Customers like subscriptions because they can pay their monthly fees and then forget about the payments and just enjoy the thing they’re buying.

One of the things that we could consider is whether we move our accounting firms to a subscription model. What that essentially means is that rather than selling different services, we charge them a subscription fee to get access to our firm. It's a more advanced level of thinking, and it's not for everybody.

Those were 13 different pricing models that you can use in your business. Hopefully, if you’re still pricing by the hour, these different options have sparked some ideas and opened your mind to other possibilities.

Check out the full video on this topic by clicking here.

If you found this valuable and would like to learn more about value pricing, I run a free live online training session every month with a topic chosen by you. Attend live and you can ask me any questions you have. Click here to register and I will send you an invitation to the next session.

Wishing you every success on your pricing journey

Mark Wickersham

Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”