Value Billing(1) is often discussed in the accounting industry. There are those brave souls who have embraced the idea and made a firm-wide change to it as the majority pricing strategy in their firm. And there are those who are watching and waiting for a slam dunk example of a firm identical to them who has been successful with it. The problem is — we will never find that perfect example.
Instead of being skeptical on how closely matched up our firm is with a success story, I suggest we focus on just one relationship at first. Let's discuss the experience for both the accountant and client. Let's identify certain characteristics of our clients that may trigger an opportunity for this model. And let's try it once. Then our firm can build a success story that resonates with us because we are learning what works and what doesn't for us and our clients.
Think of a client who you have multiple conversations with or provide services for throughout the year. Possibly, the majority of the work is annual, tied to a tax return or an audit or a financial budgeting board meeting, but you do have additional contact throughout the year, something to build on. Think of a client who would benefit from a more regular meeting, analysis, or other service you can provide. Possibly you've hesitated mentioning the additional services because you feel the client is concerned with the cost of those additional services. Perhaps the client has mentioned being surprised or stressed by the high billings during the peak season, and therefore is hesitant to engage you for smaller jobs.
A client in this scenario likely needs more from you, but how do you show the value of more services without discounting them on your end? An answer (I'm sure there are many) would be to provide value in the other variables of the relationship instead of the time/money side. Here are some suggestions:
- Propose meetings more often so that instead of your time be jammed into the peak season, you've spread it out more. The client sees more value because they feel you care about them because you are spending more valuable time with them.
- Identify for yourself areas you could be more efficient in for this relationship if you had the time to develop methodologies instead of solving the puzzle each year during your busiest time. You will have the opportunity to be efficient if you engage more often. The time you save in efficiencies will offset any additional time spent in those more valuable meetings.
- Allow for time to discuss and strategize for the future. Often our industry is living in the past, meaning summarizing the historical transactions or cleaning up the information we receive. Our clients will see a lot of value in the perspectives we can provide as they look forward to next month or next quarter or next year. If opportunity to discuss this is built into your fees, then they will value that experience and make better decisions.
- When opportunity for additional work comes, you can discuss how much it will cost to provide that work. The goal of the value billing model is not to fix the fee — it's to set the expectations of the client and the accountant. Additional services and additional scope to ongoing services should adjust the monthly value billing.
During your first "round" of value billing, it's hard to anticipate what to expect as far as covering the fees that you would have charged hourly. First, determine how much you charge them already in a year. Second, how much more would you charge to provide the additional meetings and service you're proposing to the client. Finally, divide everything into a monthly fee. I suggest agreeing to a monthly amount that is locked in for 6 months or so. As you progress, track your time spent on your work for your client, including those value-add meetings, to learn whether you're covering your time. We have found that no matter how deep we get into value billing, we will never move away from time tracking for this very reason.
By using value billing, you will find the stress of fees is gone. You are providing a value to them, not just a service. You are a member of the client's team instead of a referee. You can now go try this on your second client relationship.
By doing this, you are no longer waiting for a value billing success story that resonates with your business, because you've created your own. You've discovered what does and doesn't work for you and your clients, maintaining your profitability with accurate time tracking, yet building your relationships with clients on value, not hours.
(1) See article from the 2009 Journal of Accountancy, "Pricing on Purpose"