Value Pricing: The Cornerstone Approach
Fear not! If you missed out on Tim Hoopmann’s webinar on Value Pricing with Receipt Bank on Thursday the 19th November 2015, we have all the details for you here!
1.You’re famous in the bookkeeping world for adding 20% on top of a client’s bill to compensate for not being on the cloud. What have the repercussions been from this?
We have received some mixed reactions from the clients but it really depends on their situation…
- Some clients are accepting as they have agreed up-front to our quote and their obligations as part of the arrangement.
- Some clients are not as enthusiastic and need an explanation for the extra charges.
- Some clients will accept it once and work with us to get the situation sorted so they can avoid paying extra fees.
Here at Cornerstone, we understand that every client is different so we do offer flexibility while also maintaining the spirit of the agreement. Therefore, those that aren’t as accepting have been offered the option of moving off a fixed monthly fee in which case, they would notice an increase in their monthly fee. Overall, we work with our clients to find a solution that suits them.
2.How has the pricing of your offer evolved over time? What changes have you made since starting the business?
The move to our value pricing model was a gradual process which followed three key steps:
- Analysis of our current revenue and what that equated to in terms of fixed fees.
- Discussions with clients about who were open or looking for a value price. Those that wanted to change were then converted over and placed on a new agreement. We agreed to review their account after 3 months to check if we were both on track.
- Rolling out what we had learned about value pricing to all clients
For some time, we had been billing our clients similar fees each month. If we did the work consistently then the monthly fee would not fluctuate by much. Once we got into quoting and value pricing, we found everyone internally loved it. We now don’t need to record time! Externally, we can see that all new business prefer to have a quote upfront. Now we have no debates as all clients are clear from the beginning on the costs and obligations.
3.Do you have a benchmark that you work against when defining prices, and how do you know when you have the price right?
In the past, we used a time billing system that gathered time by activity and client. This allowed us to review their accounts when moving to a value price. The process that we used involved:
- Trialing and testing actual time by activity recommended value price per client.
- We split the bookkeeping into activities and benchmarked against these.
Breaking activities down into pieces is more effective than looking at it as one job. It’s also how you would eat an elephant… in bite size pieces!
4.You’re a real champion of technology at Cornerstone and you use a variety of solutions bundled into packages. Why is this so important to your offering?
We love technology – we find it interesting, challenging and what the future is all about. The fact that it has allowed for the team’s work time to be easier and more organized is what makes it even more appealing.
In terms of our offering, we have made Receipt Bank and some other apps mandatory for clients in order to be eligible for our value price. By using personal experiences with technology and reviewing new apps in the market, we are able to make their businesses function better.
We help them streamline their business and the best way is with apps that save time and money.
5.Do you have any advice to give to firms looking to move towards a value pricing model?
Don’t wait, start the discussion today! You will definitely find this check-list helpful to get started:
- Start analyzing your time billing by activity and by client to work out your value price for each client.
- Get your team involved – having multiple people brainstorming is better than one!
- Start quoting… You will get it wrong sometimes but you will learn from this. And use an online quoting software.
- Decide if subscription fees will be inclusive or exclusive in your value price. We have excluded them so the client pays only for the subscriptions they need.
- Go on your own journey, not someone else’s!
- Talk to your key customers and ask them what they think as it is them who will give the best feedback.
- Trial it on clients that will be willing to work with you to get it right before rolling it out across your business.
6.Finally, what will define bookkeeping as a service in the next 20 years?
The concept of cloud bookkeeping is a growing phenomenon. I believe that in 20 years-time, everything will be in the cloud. Perhaps even earlier.
People will become educated and realize the simplicity of being able to complete some of their bookkeeping themselves. The differentiating point for bookkeepers will be how they can help add value to their clients and their business… They are many varied ways to achieve this. Technology will be a major contributor.