How to Price Your Bookkeeping & Accounting Services to be More Profitable
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When it comes to deciding how to price your bookkeeping services, it’s less about the actual price, and more about profitability.
If you don’t know where to start in setting your rates, or you aren’t sure if you’re maximizing profits, this blog is for you.
We’ll examine how to:
Analyze the way you’re currently pricing your services
Set a non-negotiable base price
Choose the best method for pricing your services
Decide which actions to take with your current client list
Serena Shoup, CPA is a special guest in Breakthrough for Bookkeepers & Accountants, and she is EXCITED to break down all things pricing, packaging, and optimized offers. We are thrilled to have her share her expertise with our students, but you’ll get a sneak peek right now! 👇
If you’re struggling to nail down your sweet spot prices, keep reading to find out how to maximize your profits WITHOUT taking on more clients!
Analyzing Your Current Prices
The first step in deciding whether or not to raise your prices is to sit down and analyze your current income.
Ask yourself these questions:
How many clients would you like to have?
Are you working your ideal amount of hours?
How much do you really want to make?
Take the time to answer these questions and use your answers to reverse engineer your price to establish the MINIMUM you can charge per client.
Establishing Your Base Price
There will inherently be a difference in price based on the client, but if you establish a base price, you can rest easy knowing that every client is paying you for the value you provide.
The base price is non-negotiable, and should indicate to prospective clients that you will charge them no less than this amount for your services. This is a great way to disqualify anyone who is going to complain about pricing or can’t afford you.
Here is how to establish your base price:
Base Price = Minimum revenue / Maximum number of clients
Note: Your base price is different from your ideal price.
Ideal Price = Ideal revenue / Ideal number of clients
Use these formulas to ensure all of your clients fall somewhere within the two price buckets.
There are two main pricing models for bookkeepers and accountants to follow, but which one is right for you?
Package Pricing: Fixed vs. Variable Rate
Let’s explore different pricing models! I loved offering fixed rate packages, but other options work better for some bookkeepers, so it’s important to weigh the options before choosing one!
Fixed Rate Packages
A fixed rate package will include a specific menu of services and deliverables for a set fee.
Pricing your services in fixed packages will give you the ultimate ability to scale your offers. This is especially true if you have a niche, because you can streamline your processes and save SO much time!
If you charge one flat rate no matter how long it takes you to complete the work, you will be rewarded for efficiency.
Less time = more profit 🤑
If you choose this option, price the smallest package at your base rate. You don’t have to, but consider including a menu of add-on services if you want to give clients a few extra options.
In our group coaching program, Breakthrough for Bookkeepers & Accountants, we’ll break down how to set up and price your packages so that you don’t have to figure it out alone!
Variable Rate Packages (Value-Based)
Value-based packages will give the client the same end result, but you will have to bill them an hourly rate based on how much time you spend doing the work.
This method works well for some people, but I always found it to be confusing for the client.
Plus, the more you streamline and create efficiency in your firm, the less time it will take you to do the work. So you end up making less money the better you get at serving your client!
This type of package is great if you’re just starting out, and you’re not sure how long it takes to complete the work. You can always migrate to a fixed rate package when you’re ready!
Bonus: Retainer Pricing
Retainers are more for those one-time projects like a clean up. I always collected a deposit as a retainer before starting a clean up project.
This way, I knew I would get paid for doing the work, but I didn’t have to guess upfront how long the project would take me.
Calculate your “hourly rate” and multiply by 10. This is your retainer fee!
If you reach the 10 hours and you still have more work to complete, bill the client for another 10 hours. If the last leg of the project only takes 5 hours, you can refund them for the extra time they paid or give them a credit on their next invoice.
Analyzing Current Clients
Refer back to your income goals, is there a huge disconnect between where you’re and where you want to be?
If so, try this exercise to identify why your profitability is suffering.
Taking Action on Your Client List
The Pareto principle is the idea that nothing is distributed evenly, and the same rings true for your clients. You likely have clients that take up more of your time each month, but pay the same rate as a fairly low-maintenance client.
Start by creating a list of your current clients alongside their monthly price. Keep in mind, you don’t have to take the same action towards all of your clients. Think about each one and decide what to do individually.
When you analyze profitability per client, who is taking up most of your time?
Use this exercise to tag each client with fire, raise, or maintain!
Fire: Any clients who take too much of your time/energy and refuse to pay a fair rate to compensate for the services you provide. Disengage with your client and end it on a positive note (if possible).
Raise: Any clients you wish to keep, but are not currently profitable. This would be considered a substantial rate increase, and might cause clients to bail. Stay confident! You deserve to charge what you’re worth.
Maintain: Any clients you want to keep and are already profitable! Increase your rates annually and include this in a new engagement letter.
If you have a team, make sure you factor them into your price increases! Ask them to track how much time they spend per client so you can calculate the client’s profitability.
Taking action and making changes
When you decide if you would like to fire, raise, or maintain your clients, it’s time to notify them!
Choose which method feels right for you in terms of communicating the changes to your clients. I highly recommend you include a follow-up email if you choose to notify them verbally. This way, you can reference the changes at any time and they also have a record of the conversation.
Remember, you don’t have to make all of these changes at once. The beauty of owning your own firm is that YOU get to decide when the time is right!
Click here to snag The Motherload of Email & Form Swipe Files for Bookkeepers & Accountants! You’ll find over 30 email templates that are essential to any firm owner, including a price increase email!
Raising your prices for new clients
If you can say, “That’s me!” to any of these statements, it’s time to start raising your rates:
You’re landing 75 - 100% of your leads
You don’t want to compete on price
You’re not profitable enough
You serve a niche
You have a team
Especially if you notice you’re not as profitable as you should be, this is your chance to take a peek at those goals from earlier and take some action!
Final thoughts on pricing your bookkeeping services
One thing to keep in mind when you’re pricing your services...
It’s crucial that you’re constantly monitoring each client’s profitability by tracking the time you spend on each client. This goes for your team as well! Have them time track so you can look over the data and conduct an analysis regularly.
If you’re running your firm solo, use your time tracking data to decide which role to fill first when you’re ready to bring on a team.
Ready to seriously dive deep into the secret sauce of pricing your services for profitability?
Join our group-coaching program, Breakthrough for Bookkeepers & Accountants!
In our program, you’ll learn from guest expert: Serena Shoup, CPA!
Serena will help you break down exactly how to analyze profitability, set up your packages, and raise your prices!
Everything you want to know about pricing and SO much more is included within Breakthrough for Bookkeepers & Accountants! We’re handing over our five-part framework to creating a thriving firm, designed specifically for self-employed bookkeeping firm owners!
Are you ready to take your firm to the next level?
