Fee-based billing isn’t exactly a headliner topic; it’s a tried-and-true business model element that’s been around for decades. It is still getting ink, however, because many firms have yet to adopt it—despite its immense value.
Greg Kyte, CPA, founder of Comedy CPE and co-host of Drunk Ethics podcast, and his Drunk Ethics co-pilot, Adam Broud, are big fans of the fixed-fee model. Why? Broadly speaking, they cite two solid reasons: 1) the long list of benefits that come with fixed-fee billing and 2) the limits of hourly billing.
They also understand the barriers that keep accountants from moving to higher-priced fixed fees. Notions such as:
- We don’t know how long the work will take. This induces fear around setting fees too low or too high.
- Hourly billing is a more reliable model. This mindset quickly loses credibility when you consider that hourly billing has a definitive limit (there are only so many hours in the day).
- Clients won’t pay a fixed fee. In reality, many clients actually prefer a fixed fee approach because it eliminates billing surprises and supports accurate monthly budgeting.
Read on to learn more about the value of fixed pricing, complete with advice from Kyte and Broud on how to get there.
How to offer fixed pricing (and remove the fear)
Fixed pricing requires two key elements: knowing your services (what’s involved and how long it will take to complete work) and confidence.
Here are a few core insights to help make the transition to a higher-priced, fixed-fee model:
“It’s important to spell out work that falls out of scope to help clients see what they are getting and the value of the added services.” - Greg Kyte, CPA
Master the art of anchoring
Kyte explained that value is subjective, which is why accountants tend to undervalue their work. It’s also why so many are fearful of setting fixed prices.
The key to overcoming this challenge is to master the art of anchoring. This involves anchoring your firm to the highest level of service. In other words, always lead with Tier I services (the highest price).
Recalling the example of multi-tiered services above, notice that Tiers are listed from highest cost (service bundle) to lowest cost (stand-alone service). The logic behind this is to anchor the conversation with the highest fee services package. As you explain lower-tier services, price becomes less of an issue because you’ve removed the “sticker shock” that comes with unveiling progressively higher fees.
“Anchoring is very much a psychology-based approach that allows you to negotiate without feeling like you’re selling.” - Greg Kyte, CPA
Benefits of quoting higher fees and how to get there
It’s time to start thinking about higher prices in a different way. This involves equating fees with service value. Bottom line: There is a cost that directly aligns to the value of the work—and sometimes that value comes at a higher price.
Kyte and Broud offer a short list of reasons why quoting higher prices is a benefit to firms:
Kyte and Broud also discussed additional ways to price higher without feeling like a jerk (their words). Consider each:
The wrap
You don’t need a masterclass in pricing to know what your value is. Take the time to identify service tiers and what is included at each level. Then consider your level of expertise as you build out your fixed-fee model. For example, are you an expert in a vertical? Do you offer concierge-level support? This all comes with a higher price tag.
The main goal is to understand your value, set value-based fees, and stand firm. A fixed-fee model can attract ideal, qualified clients; weed out price-sensitive prospects; and push your firm to a new level of excellence.
The days of hourly billing are numbered. Know your value and then make the move to a modern fixed-fee approach.
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