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.

I have deliberated about releasing this 10.55 min video to the general market. It is all about exactly how to eliminate ‘write offs’ once and for all.

What the heck, it will be better for all accountants not to have write offs. They are bad, negative, sole destroying disruptive and completely unnecessary.

For some firms this video is worth hundreds of thousands of dollars worth of advice. All free! Go ahead and enjoy how to get rid of the most negative of accounting ‘business practices’ – write offs.

You should only have write ons – not write offs.

In Australia the Accounting profession is about to start a new financial year. You need to come ‘out of the blocks’ early and get off to a great start with your compliance work.

This means being organised with pricing upfront, administration people taking admin away from Accountants, checklists and scheduling all work in for the year ahead.

A trap for young players is bringing all of your work forward for the year. You need to use your deadlines to your advantage and spread the work out. You need to take the ‘lumpiness’ out of the revenue by being organised.

You really only have 1 major deadline in Australia – May 15. Oh, it’s actually June 6! use the deadlines. If the client work is not urgent then spread it out. You need capacity all through the year so you can handle additional ‘value added’ work as you sell it.

Have a good end of year Aussie firms. Make next year count.

One of the most important business building strategies that every Accountant (or any professional service firm for that matter) needs to understand is LEVERAGE. Specifically leveraging in 5 key areas:

  1. People. You can leverage your people by making sure the ratio of “people per partner” is high. The more people you have per partner (say at least 20) then then the more profit you make per partner. There are way too many partners in the Accounting profession. Many are there for retention reasons not good business reasons.
  2. Price. You will get zero leverage on the model of “time X rate in arrears”. The ONLY model for price is to price in advance with as much value articulation and courage that you can muster.
  3. Process. You can leverage your time and literally ‘find time’ by pricing up front, then working out how to take labour out of jobs. The objective is to reduce the labour input on each task. Most Accountants over engineer projects because they are looking for perfection all the time – not success.
  4. Promotion. You can leverage your promotion by getting more people in the seminar room, asking all of your clients for a referral and increasing the size of your marketing database. Every firm who does marketing needs a database of at least 10,000 names.
  5. Product. Are you leveraging what you know? I would imagine most firms ‘re-invent’ the wheel all the time instead of systemising your services into product. If you systemise your services into a repeatable process then you can have other people deliver the product.

It’s all about the leverage. If you get all 5 working together you will create extraordinary profits. Profit before partner salaries should be running more than 50% all year round – without the partners doing all of the client work!

5 Ps of Profit