Mark Wickersham
I am currently in the process of analyzing the data we have received from the largest ever study into how accounting professionals price their bookkeeping services.
Over 2500 people completed our survey, most of which were from Canada and the US.
Insightful Accountant was one of my key sponsors, without whom reaching this large audience would not have been possible. My thanks goes out to Insightful Accountant.
I’m going to give you a small insight into some of the preliminary findings from this study. If you prefer, you can watch the video here.
2683 people participated in this study, of which the spilt was almost 50-50 between professions; with 1059 bookkeepers taking part, and 1395 CPAs or accountants.
One of the things we focused on in the study was what people were charging for bookkeeping if they use hourly rates to price.
The spread of results was quite incredible. At one end of the spectrum, some participants were charging a mere $19 an hour for professional bookkeeping services, whilst the highest pricers were charging $125. That range is staggering, it’s more than 6 times as much.
We used quartiles to analyze our data, and decided to use the median figure as the average, as it is usually more accurate than the mean. The average price for hourly rates was $40 per hour.
If you were going to take the results of this study as a benchmark for where to price your services, then you should aim to charge somewhere in the top 50% of data - so between $40 and $125.
However, I strongly recommend that you do not price based on time. There are many reasons for that, one of the biggest being customers hate time-based billing.
People want certainty when they buy something. They want to know the price upfront. Hourly billing doesn’t allow the customer that certainty - the bill always comes as a surprise at the end of the job.
Research was done in the UK in 2008 amongst tens of thousands of business owners asking what they don’t like about their accountant. The top response was surprise bills. Customers often feel they don’t know what they are paying for because they don’t know the price right up front.
Even though my new study has looked into what hourly rates people are charging for bookkeeping, I would seriously advice against using hourly rates.
In the survey we started to look at specific scenarios to determine how much people would charge for different types of clients. We created 12 different scenarios, or 12 different clients. This allowed us to create a portfolio of clients to see what people would charge for them.
We could then use that data to work out which firms were getting the best prices, and who were getting the lowest. What was interesting was the patterns that emerged when we looked closely at these firm’s pricing methods.
One of the questions asked in the study was what pricing method do people use: hourly rates, a single fixed, menu pricing, or a software approach.
We found that far too many people are still using hourly rates - our survey showed 40.2% of the profession use hourly rates.
The problem is: when you use hourly rates, you make less money.
When we looked at the firms that are getting better prices, compared to those firms getting low prices, we found that there was a much higher proportion of people using hourly rates in the bottom segment of our data.
In contrast, those people getting the best pricing results had a much higher proportion of people using value pricing.
Therefore, whilst we know from the study that the average price for hourly rates is $40, I still strongly recommend you don’t price based on the hour. It is a sub-optimal way of pricing.
Customers hate it. If customers hate it, we shouldn’t be doing it - it’s as simple as that. We need to be giving a fixed price upfront.
We also know from the study that firms who use value pricing are making much more money. You need to be making the move to value pricing.
This research report is due to be published in September 2019.
I am also running some webinars at the end of August 2019. They are on the 27th and 29th at 4pm UK Time. (11am EST)
You can register for that webinar here.
When you come to the webinar, I will be teaching you how to price bookkeeping. I will be sharing with you some key strategies on how to come up with your price for bookkeeping services.
I will also share some more of the findings from this bookkeeping study and you will get an update on when the full research study will be available and how you can get your copy.
Wishing you every success on your pricing journey.
-- Mark Wickersham, Chartered Accountant, public speaker and author of amazon #1 best seller “Effective Pricing for Accountants”