How to Implement Value Pricing in Your Accounting Practice

Sandi Smith Leyva, CPA Sandi@AccountantsAccelerator.com

Where to Get Your Materials

• http://accountantsaccelerator.com/ty7077vp/ – Password: privilege2014

CPE

To qualify: > / 100 minutes / 6 polling Sandra L. Leyva, Inc. is registered with the National Association of the State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website www.learningmarket.org.

Agenda

• The definition of value pricing and when it should and should not be used

• How a few accounting leaders have mis-implemented it and spread unnecessary fear about this method

Agenda

• A multi-step proposal process using value pricing so you can learn how to communicate it to clients

What Is Value Pricing?

• Value pricing – Pricing method – Based on client perceived value or goods and

services delivered • - yes, individual client

– NOT based on cost or time

What Is Value Pricing

• There are many pricing options: – Cost+ – Time and materials – Keystone

• Usually double cost + 1

– Fixed fee – Retainer – Package pricing

What Is Value Pricing

• % of accountants reporting using value pricing – Too high

• Creating a big markup is not the same as value pricing – But it can have the same effect – better margins

Examples

• Christian Louboutin shoes • A project by McKinsey & Co • A speech from a celebrity • Some HR projects • Some internet marketing coaching programs

($100K) • An investment newsletter

When to Use VP?

• When there is a clear, high ROI (return on investment)

When to Use VP?

• When they ask for you by name – When you have carved out an excellent reputation

and you deliver

When to Use VP?

• When the client has no idea how to reach their objectives and you have strong proven expertise

When to Use VP?

• When the need is high, important, or urgent

When to Use VP?

• Better when: – Large company – High leverage – Not Commodity

When to Use VP?

• When you have a logical buyer – Small business owners can be problematic – Individuals may be impossible

When to Use VP?

• When you have excellent selling skills

Buyers More Accepting of VP

• Risk takers – (Not accountants)

• CEOs of large companies

VP Mis-Implemented

• Value pricing has been misimplemented in accounting – CPA Trendlines article

VP Misunderstood

• You are not trying to be greedy • All parties to the transaction need to feel like

they are way better off in the end • Extraordinary value (difficult in the case of

compliance or historical accounting)

VP Process

• How do you come up with the price? – You work with the client during the proposal process

to uncover it as well as the best customized solution for them

VP Process

• Selling cycle goals – Establish trust – Demonstrate expertise and confidence – Clarify scope and outcomes – Communicate price

VP Process

• Selling cycle process – Qualify – Interview – Interview – Interview – Agree on proposal together – Present price

Sales Cycle

• Qualifying questions – Who is your buyer – Time frame – Who have you used in the past – Needs vs. your expertise – Champion or importance or pain

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Decision Point

• You can cut it off here if they have the wrong answers: – Not enough pain – Not the buyer/decision maker – Not enough perceived value in clients’ eyes – Flaky – Not important enough

Sales Cycle

• Build trust through affinity to them – Clients like them – You’ve solved problems like they have – You’ve been through it before – Make it about them – If you can be one of them, share

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Sales Cycle

• Questions – Establish the situation or problem – This will be the beginning of your proposal – “Situation Appraisal”

• Client is outgrowing QuickBooks Pro. They can’t do this, this, and this.

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Sales Cycle

• Questions – What outcomes are they expecting/hoping for

• Increased revenue • Improved workflow • Headcount saved • Compliance • Risk reduction – outline these

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Sales Cycle

• Questions – What will the difference be if this project is a success – What will happen if they do nothing – If this project fails, what will the consequences be – What will be the difference in your firm’s reputation – What will be the difference in revenues and other

metrics

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4 Components: Needs

• Questions – lots – What is broken that needs fixing?

• “I can’t do ____”

– What else does your accounting system not do that you need it to do?

– What do you feel your bookkeeper takes too long at? – Where are you re-entering data?

• Cost of re-entering, errors, customer service?

– What stresses you out?

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Sales Cycle

• Ask questions that draw out the quantitative and qualitative objectives of the project – The answers to these will be the next part of the

proposal

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Sales Cycle

• Tangibles: – Reduced bookkeeping expense – Cut headcount – salaries – Cut TCO – IT costs, networking – Time – ask them their hourly rate

• Intangibles – Stress, headache – More time with family – Get to see my child’s play or soccer games

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Sales Cycle

• You are setting a series of meetings until you can complete your questions and get “conceptual agreement” on the proposal

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Sales Cycle

• How will you measure success? – Agree on your metrics

Sales Cycle

• Sample Metrics – 12 hours per month of data entry is eliminated – Revenue increases by 20% – Client’s reputation is improved – The gossip is reduced – Client will sleep better at night

Sales Cycle

• Your story

My Story • Grew up in Dallas, TX

Why Me?

• CPA • Certified QuickBooks ProAdvisor

Why Me? • RELUCTANT marketer

Why Me?

Why listen to me

40 40

Why listen to me

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“Trust me when I say you need the Kool-Aid Sandi's drinking!” --JJ Virgin, Celebrity Nutrition & Fitness Expert

More testimonials: http://accountantsaccelerator.com/testimonials/

My personal goal

• You are all a best-kept secret • Clients need you more than they think • You have the answers to help small business

thrive • Disconnect / marketing is counter-intuitive

Stamp out the disconnect that’s costing you to work harder, earn less, etc.

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Marketing Is a Skill • On a scale of 1-10, how would you rank your marketing

skills?

• Dirty little fact: Marketing vs. technical education

• Price-sensitive clients?

My story

• How many of you would have hired me if I weren’t a – CPA? – ProAdvisor? – Schlepped all over Dallas to fix QuickBooks files

since 1990’s? • Critical to tell your story

– Invest some time devising your story • One of the things I spent 1-1 time with my coach on is

creating several stories for my businesses

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Your story

• Extremely counter-intuitive – Show that you know their industry – Put yourself in their shoes – Show passion / vulnerability (especially if you are selling

coaching or training) • They need to believe you care/ they can make the

transformation

• Do not – Sell your expertise by rattling off terms, talking technical, or

telling them the answer to a 5-minute problem. – Try to prove how smart you are. You will alienate them.

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Putting it together

• Your proposal – Client’s situation – Client’s goals and objectives – How you will measure success – metrics – Your story – The offer or solution

Offer

• Only share what not how – DO NOT go into detail on the solution – DO go into detail about the value you bring

• “Install a new A/P system and customize it to your business requirements”

• “Improve the integration between you accounting system and your A/P function”

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Offer

• Get agreement on the proposal before the solution/price is presented

• Build trust before you present the price

Price-resistance

• It’s not about the price – It’s always about trust – With value pricing, you need a higher level of trust

from your buyer

Offer

• Present 3 options: S-M-L – Choice of yesses rather than yes or no

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Offer

• Show them where to get the money – Training budget, cut overhead, help with margins,

accounting expense, consulting expense, project expense, software expense

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Offer

• Present this to them in person or on the phone • Never deliver it via email without having a call

set up • Always set up a follow-up call

Positioning Your Service for VP

• Many elements can contribute to increasing your service’s value: – Name of your service or package

• Denotes investment in your brand/systems

– Your reputation – Features & benefits

Positioning Your Service for VP

• Many elements can contribute to increasing your service’s value: – Guarantee – Price, customer service level, location – Experience, connection – Your language

Adding Small Bits of Value

• Reducing data entry – Automation – knowing about tools – Looking at workflow efficiencies – Connecting and refreshing bank feeds for reduced

data entry – Checking systems integrations opportunities

Adding Small Bits of Value

• Business knowledge • Data analysis

– Against budget – Against prior year – Reasonableness check

Before / After Before After

“Monthly Bookkeeping” “Small Business Accounting Pack”

Data entry and bank recon Monthly financial prep and analysis +

Benefits to Positioning

• Avoid commoditizing yourself • Easier to sell • Meets customer’s needs more • Get higher price • Costs you almost nothing to do

Ideas for Positioning

• Ask the client / watch for opps you see – Did you know you have a risk area in sales tax?

• Watch for legislative changes – New health care bill is gold mine

• Industry trends – Anywhere, anytime accounting

• Geographic opportunities • Niche areas

2 Ways to Re-Position Your Services

• Design a survey – Last year’s AA survey told me to do this very topic

• Use Survey Monkey • Ask what they value / don’t value

2 Ways to Re-Position Your Services

• Client-centric – Not the same as customer service oriented – Go through client processes

• Ask these questions – How likely are you to recommend us to your friends? – How satisfied are you with our ____ services? – Is there anything you wish that we would do

differently? – Is there anything else that you feel we should be

doing?

2 Ways to Re-Position Your Services

• Ask these questions – Are we communicating with you too often, too seldom

or just right? – Are we communicating with you in your preferred

manner? (email vs. phone vs. in person) – What keeps you up at night? – What is your biggest business challenge? – If you had unlimited resources, how would you use

them in your business? – What is your dream direction for your business?

2 Ways to Re-Position Your Services

• Example of client-centric – We’ve changed Website products

• Added backup, spam filter, training videos • Kept mandatory customization • Threw out rest to lower costs • Bundle it (1-stop shop)

– You don’t have to tell them your components when you charge for the bundle. You don’t care what plug-ins we add

2 Ways to Re-Position Your Services

• Example of client-centric – Small Business Controller’s package

• Cash flow • Financials • System customization • Quarterly training refresh • Payroll, 1099, and Sales tax returns • Prep for tax CPA or maybe return is included

Process to Re-Position

• Think of a type of client/problem • List components you can offer

– Recons, reports, customization, setup, training, tax • Name them (or learn how to language them)

– Careful about not coming across insincere • List a snappy benefit • Complete your marketing materials

Comparison Chart

• Create a comparison chart as a sales tool for small, medium, and large offerings

Bronze Silver Gold

A/R, A/P Quarterly Monthly Weekly

Recons Quarterly Monthly Monthly

Reports Quarterly Monthly Monthly

Training N/A N/A Quarterly

Consult/Analysis/Review N/A N/A Monthly

Etc.

Look at where fear is holding you back

• Are you afraid to call the client? • Are you afraid to ask for testimonials? • Are you afraid to ask the client for favors? • Are you afraid the client won’t pay you? • Are you afraid to send a salesy email?

– I used to be …

If so, you will need to build this “muscle.”

Client-centric, open practices Old world Today

Scarcity Abundance

Hoarding Sharing

Competition Collaboration, even with competitors

Fear Compassion

Authoritarian Partnership

Practice-centric Client-centric

9-5 24/7

Private Sharing

Silent, secretive Communicative, open

Meet with client once a year Meet with client once a month

Get paid for time Get paid for performance and results

Clients are purchased or acquired through mergers Clients are acquired through relationships and marketing

Employees are encouraged to follow rules Employees are encouraged to innovate

Questions

From Vision to Action

• What one thing will you do from this webinar?