Is hourly billing holding back your business?

Chances are, the answer is a resounding YES, even if you haven’t really thought about it before! 

It’s time to move to a more client-friendly pricing model, and today we’re going to explore some of my favorites - fixed and menu pricing.

These pricing models bring clarity, predictability, and alignment with the value you deliver, making both you and your clients happier.

The Basics of Value-Based Pricing

Ron Baker, a trailblazer of value-based pricing, has long championed the idea that we should price our services based on the value they deliver, not the hours we log. His institute even created a “Declaration of Independence” from hourly billing for knowledge workers that he encourages folks to sign! 

Value-based pricing provides a solid foundation for fixed and menu pricing models. 

Understanding Fixed Pricing and Menu Pricing

While we know both pricing models are focused on value delivered, what are the differences between these pricing approaches? 

Fixed Pricing Defined

Fixed pricing is all about setting a predetermined price for your services, regardless of how much time you spend delivering them. It’s like buying a product off the shelf—your clients know exactly what they’re getting and for how much.

Menu Pricing Defined

Menu pricing allows clients to pick and choose services à la carte or select from bundled packages, each with a fixed price. Just like ordering at a restaurant, they have control over what they’re getting, and there are no surprises when the bill comes.

Advantages of Fixed and Menu Pricing for Bookkeepers and Accountants

Why go through all this work to package up your services and communicate them to your clients? There are so many benefits including:

• Predictable Revenue. One of the biggest perks of fixed pricing is the predictability it brings to your cash flow. No more worrying about whether you’ve billed enough hours this month; your revenue becomes more stable, allowing you to plan and grow your business with confidence.
• Client Satisfaction and Retention. Clients love clarity and certainty, and fixed pricing delivers just that. When clients know exactly what they’re paying for and what they’re getting in return, they’re more likely to stick around, leading to stronger relationships and higher retention rates.
• Focus on Value, Not Time. With fixed pricing, the conversation shifts to delivering real value. You’re providing solutions that help your clients achieve their goals. This elevates your role and allows you to command higher fees - while maintaining your sanity.

Steps to Implement Fixed/Menu Pricing in Your Practice

Fortunately, after years of trial and error, I’ve nailed down the steps to successfully implement these in your business. 

Step 1: Evaluate and Categorize Your Services

List out your services. First things first, take a good look at the services you offer. Whether it’s bookkeeping, monthly reconciliations, payroll, tax filings, bill pay services, or financial reporting, list them all out. 

Group your services. Now, group these services into categories based on their complexity, frequency, and the value they provide to your clients. This will help you determine which services can be bundled together and how to price them.

Step 2: Define Clear Service Packages

Now that you’ve categorized your services, it’s time to package them up with a nice neat bow!  

You’ve probably seen other service provider websites that have fixed pricing or menu pricing and packages listed. Check them out for inspiration, noting what seems clear to you and where you would improve. 

• Create predefined service packages with a clear scope of work for each. 
• Consider offering tiers (basic, standard, premium) to cater to clients with different needs and budgets. 
• If you’re leaning towards menu pricing, offer individual services or combinations that clients can pick from, each with a fixed price.

Remember - the key here is clarity. If your packages or bundles are too confusing, your clients won’t have a positive experience. 

Step 3: Set Fixed Prices

Here’s where the magic happens—pricing by value. Don’t just slap a price tag on your services based on the time they take; consider the outcomes and benefits they deliver. What is the return on investment (ROI) your client will enjoy from each service? 

Use price anchoring by offering multiple pricing levels (Good-Better-Best) to gently nudge clients toward the middle or premium options.

Step 4: Communicate the Value to Clients

Once your pricing is set, it’s crucial to communicate the value to your clients. Highlight the predictability, transparency, and how your pricing aligns with their business goals. 

Walk them through the service packages or menu options, emphasizing the benefits and how these services will make their lives easier. Remember, people will only buy a product or service if it solves a problem or improves their life situation. So, when you communicate your value, make sure you drive this point home. 

Step 5: Establish Clear Service Agreements

To avoid any misunderstandings down the road, clearly define the scope of work for each package or menu item. Make sure both you and your client are on the same page about what’s included. 

And don’t forget to set boundaries—if additional work is needed beyond the agreed-upon package, be prepared to renegotiate or offer it as an add-on service.

Potential Challenges and How to Overcome Them

Just like any new strategy in your business, there are always potential challenges on the horizon. Luckily, I’ve seen many of them already. Here’s how to prepare:

Setting the Right Prices

Getting your pricing just right can be tricky. To determine the appropriate value-based price, consider:

• The outcomes your clients are looking for
• The benefits they’ll receive
• The return on investment your services provide

Managing Client Expectations

Transitioning from hourly billing to fixed/menu pricing might require some client education. Be ready to explain why this model is better for them and how it aligns with their business goals. It provides them with budgeting certainty and clarity in their monthly deliverables. 

Practice ahead of time by yourself, with a friend, or with a colleague so you can speak confidently about the value you’re offering. 

Dealing with Scope Creep

Scope creep can be a real pain, but it’s manageable with clear agreements and ongoing communication. 

• Set expectations upfront, making sure they’re written down, ideally in your contract or scope of work. 
• Keep in regular communication with your clients, so they feel comfortable with the new arrangement. If you’re communicating the deliverables and value you’re creating for them, they’ll feel comfortable working with you. 
• Don’t be afraid to renegotiate if the scope of work expands. 

Embracing the Future of Pricing for Bookkeeping and Accounting

Ready to ditch hourly billing and start pricing for profit? 

It’s time to evaluate your current service offerings and pricing structure and make the shift to fixed or menu pricing. With the benefits of improved client relationships, increased revenue stability, and a focus on delivering value, there’s no better time to embrace this future-forward approach.

We’ve seen this approach help our clients succeed for years! Get in touch today to learn how Bookkeepers IGNITE can support you on this journey.