Discover the secret to transforming your practice through strategic pricing!
This game-changing bookkeeping strategy will make your clients see and feel your value, and be more outcome focused rather than price focused. It will absolutely be a key to you building a thriving practice with delighted clients, so that you can live your dream on your terms.
We've all heard a lot about pricing. I've been tuned in to the what, the why, the how of all things pricing for 13 years now. When I first transitioned from being an employee to working for myself, I started out by charging an hourly rate to my clients, which seemed significantly higher than I was being paid when I was an employee, which seemed great at the time.
My mindset when pricing then, was that of an employee, and not as a business owner.
Here's the bottom line: If you are charging by the hour, you are stuck in the EMPLOYEE MINDSET. And so the first thing you need to do is
change your mindset from that of an employee
to that of a BUSINESS OWNER.
You may have done some research already around pricing. If you have, you have probably read you should stop charging hourly, and start VALUE BILLING, or VALUE BUNDLING, or FIXED PRICING. The evidence is clear. It's irrefutable that OUTCOME-BASED BILLING is a superior pricing system and it's a win for the client as well as a win for your business.
So no doubt you've heard all this evidence, so then, why can't our industry get bookkeepers as a whole to abandon hourly billing? I say it's because we haven't named the problem, and you need to name it to tame it: employee mindset.
If you have done your research, you've seen the evidence and you are still charging by the hour, then why? Most people are going to tell you it's probably because you lack the confidence to change, and you are scared to change. And I actually think that that is not the key driver here. I think the key driver is the mindset, the employee mindset. And I think if we can get to the root cause of why some of us think that charging by the hour is better for our clients and better for us, then we can change our mindset and realise that we are thinking the wrong way, which means we are acting the wrong way.
Shifting Your Mindset
Making a mindset shift is key to so many transformations. If you have read my book, I talk about bookkeepers being very uncomfortable on the whole with sales and marketing. The mindset around it tends to be they want to clam up and say, "I'm not comfortable with this” or “I'm not good at this.". Well, I am here to help you make your current ceiling your new floor.
Outcome-based Billing in 48 Hours
In 2015, which was about six years after I started in practice – that's when I finally, within a 48 hour period, went from billing by the hour to fixed pricing. I'd been told by a lot of people that I should move to value billing or fixed pricing, but I actually thought that it would be a disservice to my clients, and they always come first.
Clients are always the first thing I think about. Even if it benefits me, I'm like, no, if it doesn't benefit my clients, I don't want to do it. So way back then, I didn't really know that. The reason that I finally shifted is I saw a really great speaker and he said, if you're still pricing by the hour, Jeannie, you're an idiot. Now, this could be seen as really offensive but I'm really, really black and white and I like to be hit in the head with things sometimes. When this speaker told me I was an idiot I thought, "wow, if I had known that I would've changed earlier".
So back then I went back to my little home office and within 48 hours, I had all my clients moved from hourly billing to fixed priced billing. And realistically, I did it in a really rough and ready way, and there was nothing wrong with the way I did it, and it's still a great way to do it today.
Outcome-based Billing Calculation
So how did I come up with the price? I first looked at my clients' annual bill, and if their work was maybe about the same, I just divided it by 12, and that was their monthly bill. And then I talked to them and they were all fine with that. And what I discovered in the year that followed is not only did I double my net profits without really increasing turnover, I didn't have to double turnover to double net profits. In fact, I even took a bit of a break at that time. So certainly I was not rapidly increasing turnover. Not only did I double my net profits, but my clients saw the VALUE in what I did like never before. They became happier than they'd ever been.
Win-Win for Everyone
So it was definitely a really great win for my clients as well as a win for the practice. I remember at some point, one client actually said to us, "How are you guys doing everything that you do for the fee that you charge me?" I guess I started to realise that sometimes we need to speak to clients more, sometimes less. Sometimes we need to jump in and give them a bit more support, with a bit of software or whatever it is.
The work week-to-week, day-to-day, month-to-month can go up and down a little bit, but there are times when we've got a lot less to do. There are times when we've got more. The clients actually remember when we are doing tons for them. It was so exciting to get this feedback from the clients that they were happier than ever before, which of course led to even greater RETENTION and REFFERALS. And so I had this belief initially that outcome-based fixed pricing would be a loss for the client, however it was a win for my client.
Business Owner Versus an Employee
One of the reasons that you really need to make the fundamental shift is because running a business is so vastly different to being an employee. And I suggest that this applies whether you are a bookkeeper that's just working a couple of days a week, or whether you're a bookkeeper working full time and employing staff. I've heard bookkeepers say, oh, well, I just work a couple of days a week and I just contract a couple of people. So again, I'm just going to sit in the employee mindset. And these same bookkeepers wonder why they don't feel like they're really getting rewarded with the kind of money that they would expect for the time that they're putting in.
And that's because you are running a business, you are no longer an employee. Unless you are on the payroll and being treated exactly like an employee, and let's look at what that looks like now. So when you're an employee and you're on the payroll, you go into the office or you work from home and clock on, you get paid for the hours that you do, you get superannuation, you will often get holiday and sick leave, even if you don't get those things, there's work cover.
If you need to educate yourself, you educate yourself on your employer's time. You don't have to get insurance, the expectations upon you as an employee are different.
When you go home, you don't have to take your work home with you, so to speak, mindset wise. I would come back to expectations. The expectations placed upon you when you're an employee are quite different to what they are when you are working for yourself. Even if you are labeling yourself as a contractor, when you are a contractor or in practice for yourself, you are expected to be, as a bookkeeper, licensed, registered, and insured.
You do not have the protections that an employee has. You are expected to work longer and be educated, stay educated, improve your education on your own time. Unlike an employee that clocks on and gets paid through the payroll, you'll need to prepare your hours and justify your invoice to your client, which is completely different as well. You won't get paid for the time that you do that, the time that you have to open your accounting file and raise your invoice.
The expectations that your client will have – even if you are contracting to them and you don't have a lot of clients – will be much greater than if you were an employee. And you will have expenses. If you have really, really low expenses, I promise you, they will still be about a third of your income. If we really drilled into them, about a third of what you are getting paid will go back into your business to pay for all the different things that you need to pay for, and the time that it takes in order to even lodge your own compliance. As an employee, you don't have any of that. At the end of the year, it's all there for you and it's all taken care of. When you're running your own business, you need to get into the business owner mindset and stop acting like an employee.
Name it to tame it
So what I'd ask you to accept is that, if you are going to continue to charge by the hour, that you are stuck in the employee mindset – name it to tame it. If you are going to refuse to move to an outcome-based billing system, charging for outcomes rather than hours, then you are stuck firmly in the employee mindset.
I would like you to consider the amount that you are charging hourly, so let's call it a hundred dollars an hour because that's a really easy calculation – then, $33 of that you are not getting paid. So you can reduce that rate by $33, okay? Because a third of that is going to be time and money spent on all the activities required to run a successful business. Not to mention that you are much more liable, which is why you need insurance.
You are much more liable. And I have met a bookkeeper who did end up being sued by a client, and she wasn't ready, and she was firmly in the employee mindset, and she was under the illusion she had a lot more rights than she did. You are running a business, or you are an employee. There is no gray in between.
And that's what I really want you to take away today when you are considering your PRICING STRATEGY. In terms of how to move to an outcome-based billing system
Why would you sell hours when you can sell outcomes?
Delight Your Clients
The pathway to happier clients, to more delighted clients, is outcome-based billing. I further discuss this and everything else you need to build a thriving practice in my book, where you get to live your dream on your terms. It's linear, you need to build a thriving practice that allows you to delight your clients. And only then do you get the privilege of living your dream on your terms, just like I did.
It was about 2015 after I had started value billing, and in 2016 when I had got to a point where I had a robust lifestyle practice. I had to build a thriving practice, I had to delight my clients. I never would've got to where I had got to without outcome-based billing. And then going on a journey year-on-year, and doing my laps around the sun to improve, and listening to my clients, and keep improving and improving and improving, and future-proofing.
Where Do You Start
In terms of how you are going to move from billing hourly to billing outcomes: first thing, make the mindset shift. Even if after reading this and you are thinking to yourself “I don't agree” just let it marinate, let it sink in as you bill your clients. Maybe try billing a new client on a fixed-price plan, but start the mindset shift. I mean, I'm really happy if you do what I did – more so if you do it in 48 hours, like I did!
There are so many great resources out there. A couple of suppliers to our bookkeeping industry that I would definitely point you towards is Dext. If you Google them and sign up or even just contact them, they will have tons of pre-recorded and live webinars on pricing that will help you. And in fact, they helped me out a lot in the early days with pricing.
Practice Ignition Is another great platform we use, built to help you with pricing. I discuss both of these platforms in my book, and I want to tell you about the tools that we use, and there are other tools too.
In my program I give you a pricing calculator. It's included in our Systems module, and it really works. Not only do we give you a pricing calculator, we show you how to use it, and then we help you with how to implement and continue to use it and refine it year-on-year. It's all done for you, and we give you all the calculations and an actual calculator. The other thing about outcome-based billing is once you move to this, you are going to have a lot more options around your succession services.
So, hourly billing is the employee mindset. Get rid of it altogether. You don't need to make exactly the same profit on every job. You can make more or less, but if you get an outcome for a client, if you meet or exceed a client's expectations with an outcome, that's where the magic happens, not when you bill them hourly.
I could go on and on and on about pricing and mindset. I guess what I want to leave you with is encouragement that if you are pricing hourly, please move to outcome-based, and to grab a copy of my book for more help. Please continue to tune into my socials as I would love to continue the journey with you and keep on helping you.