How to win new clients this tax season with three-tiered pricing

December 1st, 2020 by Practice Ignition Team 6 minutes read

Accountants are undeniably business experts. Unfortunately, however, many aren’t pricing experts. There’s no set formula when it comes to pricing—meaning accountants are left to pick and choose between time-based pricing, fixed fees, value-based pricing, and more.

But what if there were another option, one that gave your clients more choice to pick what suits them—and which might even help you raise your own rates? Fortunately, there is: three-tiered pricing. Our Senior Partnerships Manager Ryan Embree recently caught up with three-tiered pricing expert Ryan Lazanis, owner of Future Firm in Canada, alongside Practice Ignition’s Jennie Moore, Head of Accounting, Americas, to discuss three-tiered pricing in more detail on Facebook Live.

We delved into:

  • Why you need to rethink your pricing model
  • What makes three-tiered pricing such an attractive option for both practices and clients alike
  • How you can implement a successful three-tiered pricing strategy

Why you need to rethink your pricing strategy

Devising an effective pricing strategy is easier said than done. Jennie recalls that when she first started out, she used an hourly model—but she’d only valued herself at $15 an hour, which was “a really gross rate”. Quickly realizing that there were only so many hours in a day, however, she soon transitioned away and instead adopted a fixed fee pricing model.

This type of error is common amongst accountants, especially those at the beginning of their career. Ryan himself made the same mistake, adding: “From the get-go, I knew I was going to be implementing a subscription-based model where they'd be getting an upfront fixed price for a bundle of services. Problem is, I had no clue how to set my prices. So I didn't go the hourly route, but I did go the fixed price route. And I think my packages, which ranged from 150 to 350 bucks a month, included unlimited everything.”

$350 per month per client might seem attractive when you first start out. However, if you’re offering unlimited support, then you’ll soon realize that you’re working all hours without being appropriately recompensed. Jennie and Ryan came to the same conclusion during their conversation: accountants perennially undervalue themselves. As such, it’s crucial that you rethink your pricing model and realize your true value.

According to Jennie, “It’s still very present, even with extremely smart individuals—they just don’t understand the value of what they do. It all comes down to confidence. Once you start believing that your services are really valued, you’ll then feel more confident bringing your prices up”. Ryan agrees, adding: “A lot of what I do here at Future Firm is coaching other firms. One of the first things I always do is increase their prices off the bat because the majority of people undervalue themselves.”

Interestingly, Ryan suggests that this comes down to the fact that accountants have been taught there’s a formula for everything. When it comes to pricing, however, there really isn’t a formula as such—it’s entirely up to you. “It’s about reading the clients, the situation, the scope of work, and the timeline, before fixing a price that makes sense for both parties”. This implies that pricing often has to be fluid. It’s a dialogue between two parties, not an imposition of terms—and there certainly isn’t a set formula to follow."

How to approach pricing

As stated above, there really is no set, defined way to approach pricing—so you can’t simply have a one-size-fits-all approach. However, Jennie and Ryan suggest following a value pricing model e.g. where you price projects depending on the individual clients and their specific requests. But Jennie has a warning: “Do a little due diligence first—you don't want to lose a client because you're not fully understanding what value pricing is. Carry out your own research, check out some groups, check out what Ryan's doing, and start engaging with accounting professionals that are already doing it. Learn from our mistakes.”

And if there’s one resource that both Jennie and Ryan swear by, it’s the book Implementing Value Pricing by Ron Baker. According to Ryan, it will help you learn “value pricing, how to understand the customer, why discovery calls are so crucial, and how to assess value”—things that he wishes he knew earlier.

He recalls that when he first started, he put up his prices on his site and simply let people sign up with their credit cards before speaking to someone. He quickly realized this is a big no-no. In order to work out your pricing for each client, you first need to gauge the scope of work—so you need to have a detailed conversation with them before even suggesting a price.

Why three-tiered pricing is so effective

Of course, it’s entirely up to you to pick and choose your own pricing model, but Ryan is a big advocate of three-tiered pricing. “With three-tiered pricing, you propose three levels of service: Gold, Silver, and Bronze. It’s not easy trying to find the sweet spot between what you want (the highest price possible) and what the client wants (the lowest price possible). Three-tiered pricing essentially widens the bulls-eye, making it easier to find something that suits you both.”

Options pricing is less direct—there’s no sense of “take it or leave it”. Instead, you offer clients the ability to pick their own level of service and corresponding price point. You can also customize the options that you offer. If you’re pitching to a small startup that’s bootstrapping, then you’ll likely offer fairly basic services at a lowish price point. If you feel like someone wants a premium service, however, then you can suggest that they opt for a more all-encompassing package.

How to present these options to clients

Present these options to clients with ease in Practice Ignition using the recently launched New Proposal Editor. Take your proposals to the next level by providing this additional level of customization, making clients feel like you’re listening to their specific needs—instead of simply dictating a set price. Jennie has even had impressed clients ask her what her proposal system was and whether they could use it within their own company!

By sending off detailed three-tiered proposals in Practice Ignition, you’ll show that you can meet a range of client needs. If you want more details on how to do this, check out our recent blog on the different ways you can use proposal options in your business.

Take your practice to the next tier

Three-tiered pricing will allow you to wow more prospects, raise your rates, and make sure you’re being paid what you’re worth. What’s not to love? If you’re ready to take your practice to the next tier and embrace options pricing, sign up for a demo of our Proposals Options feature today.

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