Mark Wickersham – Charge clients more for the same work

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Mark Wickersham started his accounting firm in May 1996.

Two and a half years later, it was clear something wasn’t working. “I made a complete hash of it,” he explains. “It grew very quickly, but didn’t make a lot of money.”

Looking back, he realised his problem was pricing, so he started learning about it. In 1999 and 2000, he implemented what he learned, and his results changed almost immediately. Before long, he was delivering presentations and classes on pricing to other accountants. “People who followed what I did were getting significant increases in prices, and I realised I enjoyed doing that more than running my accounting firm,” he says.

Now Wickersham is well established as a pricing guru for accountants. In fact, he’s written several books on the subject, the first of which, Effective Pricing for Accountants, was published in 2011. He believes the time is right for accountants to finally get their heads around pricing.

“Because of cloud technology, firms have to change their pricing model,” he says. “The old-fashioned pricing models are redundant. We have to figure out value pricing. Unfortunately, very few firms have made that transition so far.” Moving to a value-based pricing model isn’t easy, though. Value is subjective: every client will assign a different value to what they buy. So how can you put a pricing system in place that works for all of your clients?

1. Forget everything you think you know

How do you charge the right price for your services? The truth is that there is no right price. “With value pricing, there’s no such thing, so we shouldn’t be looking at ways in which we can deliver ‘the right price’,” says Wickersham.

“We don’t know what the right price is because we can’t read the customer’s mind. We have no idea what they’re prepared to pay and how much they value things.”

2. Try the ‘menu’

One of the simplest ways to increase pricing is to offer a menu of options to your clients. Wickersham advocates offering three choices for each service that you offer, outlining what you get in each price bracket. This is a model used by many online subscription services (cloud accounting software, for example) and it’s long been a feature of the fast-food industry.

For example, by offering lattes in small, medium and large sizes, Starbucks’ pricing structure allows people to make a choice based on how much they value the product and brand, Wickersham explains. “Some people don’t put as much value on it – they just want a quick drink, so they buy the cheapest one. Others value the whole environment. They want to sit there with their laptop or have a meeting, and therefore they’ll buy a more expensive one.”

Faced with three choices, each customer will choose the package that represents the best value to them. A menu is a very good starting point for determining what your clients are willing to pay.

3. Communicate your value

When a client declares that your prices are too expensive, it rarely means that they’re price sensitive – rather, they don’t understand what they’re paying for. Once the client understands what they’re getting, they’ll pay a higher price, even if they’re getting the same service that they had in the past. Wickersham has some simple steps to help clear this hurdle: for every service you offer, list all the processes you do.

“We could easily fill pages with bullet points of all the things we do, but we never tell the clients. If we don’t tell them what we do, how can they see the value?”

Once you have your list, use it to determine the real benefits to the client. You need to look at each process you do, and think about how your clients benefit from it. “Everything we do has a benefit to the customer,” says Wickersham. “Reconciling the bank account might sound meaningless but, when you think about it, we ensure that every piece of expense that’s gone to the bank has been captured, which means that we maximise the tax deductions.”

4. Look the part

Wickersham is a scholar of price psychology. One phenomenon is the ‘power of context’ – people attach a value to a product or service based on the context in which it is delivered. “If you have a meeting with a prospective client and you have a shabby boardroom with dirty coffee cups in it, it will influence their perception of the quality of the work that takes place, and so what they’re willing to pay,” he says.

Clean, modern offices, good cups and great-looking presentations make a difference. Those running practices from home should remember that visiting a client’s offices will make an excellent first impression.

“Going to a client’s premises shows you care and you’re interested in what they do,” Wickersham adds. If you can’t visit their premises, a nice local hotel or coffee shop may do: “I know a sole practitioner who gets great pricing. He holds his meetings in a hotel, as it’s easy to find, with free parking and beautiful meeting rooms. There’s coffee and free wi-fi, and his clients love it.”

Go further

The ultimate value pricing methodology is what Wickersham calls “iterative digital pricing”. This involves setting up a spreadsheet or other software and creating a series of questions that you put to the client to determine what they want.

The software or spreadsheet calculates a high price, which you can then work down from systematically. “For example,” says Wickersham, “is it important that they work with the senior partner, or can they work with someone more junior?”

The important thing is to have a solid system in place. Working out the cost of each element will involve a bit of trial and error, but, as long as you know those costs (or your system does), this method will work.

“The client can see how the price is building up,” says Wickersham. “That transparency creates trust and credibility. If you try to do it by winging it, you don’t have anywhere else to go – you just start to haggle, which isn’t very professional.”
Mark Wickersham will deliver a keynote speech ‘The big cloud opportunity’ and a value-pricing workshop at the AAT Annual Conference. Book your ticket now

Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.

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