Accountants and bookkeepers tend to spend a lot of time in their heads—thinking, processing, and focusing on the work. The problem with this is that it can limit you from dreaming bigger. It can hinder you from building the firm of your dreams—one where you make the rules, select your ideal clients, offer services you’re best suited to deliver, and charge based on value.
All too often accounting professionals allow clients to run the show. When this happens, it’s the client who spells out the services they want, how they want to work with the firm, and even how products are delivered. When clients are in control, it prohibits firms from implementing standardized processes, an advanced- technology ecosystem, and value-based pricing.
Taking back control of your business is key. And with the goal of control in mind, it’s time for a frank discussion on the truth about building your client roster, business model, and pricing. Cindy Schroeder, Co-owner of Bright Bookkeeping LLC, joins our Driving Digital Transformation series to provide guidance on each of these areas.
Adopt a ‘red-rope’ policy
In the world of Disney (which Schroeder is a life-long fan), lives the legendary Tip Top Club—an exclusive, invite-only venue that adheres to strict rules for entry. In other words, it’s the club owner who determines who passes the red rope.
Schroeder advises firms to “be” the Tip Top Club—to set rules that clients must adopt and invite in only those who are willing to adhere to the firm’s business model. In other words, implement a red-rope policy.
“Consider your place of business as the Tip Top Club. A place that not everyone gets to go to,” said Schroeder. “The red rope policy should start the minute a lead reaches out to you.”
The goal here is to be selective—to not take just any client who calls. The reality is that not every lead will be a good fit. You must first properly vet leads to ensure they’ll be ideal clients, and you can start by asking a few key questions:
- Is the lead a good fit overall? (e.g., Will they adopt our technology ecosystem? Do they meet specific revenue/size criteria? Will they pay a fixed monthly fee?)
- Do we offer the services they are requesting?
- Is this a client we would enjoy serving?
- If your firm is virtual, is the client willing to work with you remotely?
- If you specialize in certain niches, is the lead in the vertical you serve?
According to Schroeder, there is a standardized process firms should follow to identify the right clients (those who can pass the red rope). Asking a few key questions is the first step to weeding out those who may be a bad fit. She also advises firms to clearly articulate the types of clients they serve on their website so it’s clear from the get-go.
The process for getting your ideal clients
Schroeder provided insight into Bright Bookkeepings’ client vetting process. Following this formula can help you single out leads that don’t fit your model while identifying ideal clients and, potentially, procuring full-service work.
Step 1: Schedule a discovery call
This is a 15-minute call that serves as an initial evaluation of the lead. You’ll gather such information as their goals, pain points, and how committed they are to improving their business. Based on discovery information, you will be better positioned to decide if you want to take them on or refer them out to another firm.
Schroeder shared a list of sample questions to help move the conversation forward. Depending on the lead, you can select questions that are relevant.
Step 2: Conduct a review
If the lead appears to be a good fit and committed to your services, the next step is to conduct a review of the client’s files. Schroeder has branded this work the “Bright Review.”
“This is a comprehensive review of the prospect’s files to see exactly where they stand [how clean their files are],” explained Schroeder. “We charge for the review, so you can also get a good idea of how committed they are if they’re willing to pay for the review.”
The Bright Review includes a comprehensive analysis of the QBO file, a written report on findings, and a 60-minute follow-up call to review the results. Time is also allotted to answer clients’ questions and educate them on next steps for file cleanup.
While the review is far more comprehensive, Schroeder shared a few key areas included in the review:
- Balance sheet items such as bank and credit card reconciliations, uncategorized assets, undeposited funds, and balance equity.
- Profit and loss accounts including accuracy of accounts and uncategorized transaction lists.
- Additional reports including A/P detail, A/R detail, and vendor by expense.
“This call is also a good opportunity to show the clients how knowledgeable we are and the value of our services,” said Schroeder.
Step 3: Cleanup
During the review call, you’ll get a good sense of the extent of cleanup. This helps you determine pricing. This also allows you to offer potential clients a set of pricing options.
“Depending on the level of cleanup, you can get a good sense of what to charge,” said Schroeder. “Some clients may want you to go back years, which would clearly be a higher price tag.”
Once price is determined and the client signs off, the cleanup process begins.
Step 4: Discuss ongoing monthly work
After cleanup is complete, you then move on to discussions around monthly services. Bright offers service levels that clients can choose from including: review only; review and account reconciliation; or full-service, where the firm handles all bookkeeping work on a daily basis (e.g., updating receipts, coding QuickBooks transactions, payroll entries, etc.).
“By this stage, most clients want the full-service package because they clearly see the value of working with us,” said Schroeder.
If clients don’t commit up front, Schroeder suggests consistent follow-up via email or phone to move the prospect through to client conversion. She suggests at least 5-7 follow-up attempts.
Tips on pricing, packaging and avoiding pitfalls
Within the profession, two long-standing and proven pricing models have served bookkeeping and accounting firms well—hourly and fixed fee. Schroeder provided insight on both while also offering a few pros and cons. This information is helpful as you think through which model is the best fit for your firm.
Hourly: This model requires you to bill based on exact hours worked. The pros include getting paid for every hour of work, eliminating the need to re-quote jobs, and removing concern of under-charging.
The cons include the need to track hours, earning less as you become more efficient, and manual invoice creation.
Fixed: This is when you offer services at a fixed amount. The pros include knowing exactly how much you will make each month, increase in earnings as you become more efficient, and the ability to automate invoices.
The cons include potential scope creep, a higher difficulty level of determining fees for newbies (there’s that risk of undercharging), and the fact that not all leads will agree to a fixed fee.
Schroeder also offered some insight on what she calls “desire-based pricing.” This model is simply a compromise between hourly and fixed where you calculate your cost and desired price and then pick something in the middle.
She added: “The calculation can include intangible factors like if you need another client or if you think the client will be a pain … Overall, just make sure to set a price that reflects your value because you are worth every penny.”
Think beyond the work
To avoid the pitfall of scope creep, Schroeder also encourages accounting and bookkeeping professionals to look past the transaction work and consider the time you’ve spent (and will continue to spend) on education and training. Ongoing education enables you to provide great value to clients, and that value should be reflected in your pricing.
“Get out of the habit of just thinking about the time it takes to do the bookkeeping. The rate should consist of the actual work, your education and training time, marketing for the work, and admin duties to fulfill the work and follow-up on it,” explained Schroeder.
Moving clients from hourly to fixed
As operational efficiencies rise, it makes sense to move clients from hourly to fixed pricing. This removes the barrier of hour-based earnings and allows you to charge clients based on the value of your work. In other words, it enables you to serve more clients, increase monthly revenue significantly, and simplify operations overall.
To determine a fixed fee, Schroeder offered an easy formula: Determine how much you charged for a set amount of time and divide by the number of months.
And to help get clients on board with fixed-fee billing, be sure to clearly explain the benefits to them:
- It allows them to easily budget per month because they know exactly how much they will pay.
- It eliminates invoicing surprises that can come up with hourly billing.
- It offers them a year-round partner to support their success.
You should also start with your best, most appreciative clients. They’ll be more likely to accept fixed fee pricing, and it will help build your confidence in “selling” the new pricing model to other clients.
Avoiding pricing traps
As you think through your pricing strategy, it’s important to understand the common pitfalls. After 15 years in business, Schroeder has fallen into her fair share of pricing traps and offers guidance on how to avoid them.
- Don’t be afraid to walk away—Once you get into the work, you may discover it’s not a good fit. In these cases, don’t be shy about breaking up with the client. You might find that the client is difficult to work with, expects added work outside the fixed engagement, or is late paying. No matter the reason, it’s okay to be honest and offer a partial refund to avoid a problem client long-term.
Live your dream…
There’s lots to consider when building an accounting and bookkeeping business. And at the top of the list should be running a firm that you love. This means supporting the clients you want, delivering the services you excel at, and charging fees for the value you offer.
To do this, it’s important to onboard only your ideal clients and not be afraid to charge what you’re worth. Remember, ideal clients are those who adhere to your business model...only those you allow passed the red rope. Once your ideal clients are on board, make sure that you continue good pricing practices—start with signed engagement letters that detail work (avoid scope creep!), ask for deposits on large projects, incrementally invoice for longer-term projects, and even walk away when clients prove to be a bad fit.
Following the tips in this article from seasoned business owner, Cindy Schroeder, is a great place to start to build the firm of your dreams.
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