I was asked a question last week as to when an Accountant should be using Value Based fees or value pricing. Simple answer – 100% of the time.
Let me explain. Let’s start with a definition from the guru of VBFs and my friend Alan Weiss.
“A value based fee is a fixed fee that represents your contribution to the value your clients receive, representing a dramatic ROI for them and equitable compensation for you”
So if that is the case then in an Accounting firm you are always contributing value. Even with compliance and audit work you are contributing value. The trick is to determine (with your client) what the value is that you are contributing. You need to get creative and work out the tangible or intangible value you are offering.
Here are some examples:
Tax planning service VE (value equals) knowing how much to pay and maybe a reduction
Compliance service VE the ability to make better management decisions, basis for planning & keep out of gaol
Systems audit VE knowing what to do to improve efficiency levels
Cashflow management VE Understanding and freeing up cash
Audit VE accuracy of records for better management decisions
Valuation VE ability to realise wealth
Personal income tax return VE tax refund (potentially)
And so on.
If you can work out the value you are contributing then you can work out what is a fair ROI for the client and then you can work out a fair fee for you. You will never work out a fair fee with a time X rate model. How do you know if the price is too low or too high?
The only right price (and it MUST be a fixed price) is just before the client says no. If they keep saying ‘yes’ then the price is tool low. Let the market place determine your value – with their payment or their feet.
You have to remember that without your expert help as an Accountant your clients cannot realise all of their potential. You have to believe that. And that’s the first sale – to your self.