As a CPA client, do you prefer fixed pricing? i.e. this project will cost $X? Or do you prefer hourly pricing?
If hourly, why? Is hourly pricing just the way everyone does it? Or do you see a correlation between how many hours one takes to do something vs. what it is worth?
Law firms do a good job of hourly because it is tough to scale reading contracts and their hourly fees are quite high (generally). CPA firms, however, partially because of their connection to computations and technology, almost have to find ways to scale basic tasks.
This makes the hourly pricing harder and harder to support. If we can do some insanely complex task in 15 minutes, but it requires specific knowledge that has taken years to accumulate and practice, does the hourly arrangement still make sense? Should we just charge higher hourly rates? Change what we do?
The Tunstall Organization, Inc. prices most of our engagements based on an estimate of what the service is ‘worth’. Sometimes this is called value pricing. This aims at finding what the service is ‘worth’ to the particular business, which requires learning more about the business. The investment in services then becomes budgetable and fixed and is intended to produce a return on investment. This ROI can be quantified in higher revenue/profits or lower expenses but usually is realized in the dimension of quality of life – comfort in the accounting system goes up.
It is definitely riskier from a pricing standpoint, and scope needs to be well defined…but when done right, it seems to work the best for both practitioner and client.
If hourly, why? Is hourly pricing just the way everyone does it? Or do you see a correlation between how many hours one takes to do something vs. what it is worth?
Law firms do a good job of hourly because it is tough to scale reading contracts and their hourly fees are quite high (generally). CPA firms, however, partially because of their connection to computations and technology, almost have to find ways to scale basic tasks.
This makes the hourly pricing harder and harder to support. If we can do some insanely complex task in 15 minutes, but it requires specific knowledge that has taken years to accumulate and practice, does the hourly arrangement still make sense? Should we just charge higher hourly rates? Change what we do?
The Tunstall Organization, Inc. prices most of our engagements based on an estimate of what the service is ‘worth’. Sometimes this is called value pricing. This aims at finding what the service is ‘worth’ to the particular business, which requires learning more about the business. The investment in services then becomes budgetable and fixed and is intended to produce a return on investment. This ROI can be quantified in higher revenue/profits or lower expenses but usually is realized in the dimension of quality of life – comfort in the accounting system goes up.
It is definitely riskier from a pricing standpoint, and scope needs to be well defined…but when done right, it seems to work the best for both practitioner and client.