Billing by the hour? Think again

Most accountants know they're undercharging. It shows up in scope creep, legacy discounts and long days that don't translate into healthy margins.

Loren Fogelman, founder of Business Success Solutions, says the antidote is value pricing: shifting from billing hours to pricing outcomes. 

In this interview with The Net Gains, Fogelman explains how to recognize when you're undercharging, raise rates without losing clients and package services in a way that makes sense for you and your clients.

 If you've ever wondered how to charge what you're truly worth (without losing sleep), this one's for you.

—Interview by Janet Berry-Johnson, edited by Bianca Prieto

Many accountants underprice their services out of fear of losing clients. What mindset shift is needed to move from price-based to value-based conversations?

When fees are tied to hours, you undervalue your expertise. Value pricing shifts the focus to outcomes and relationships. You might worry clients will leave or think all your clients are price sensitive, but usually it’s the lowest-margin clients who push back. And, client-centered firms discover their best clients are willing to invest in the relationship.

Firm owners I work with convert 82–100% of their roster, including legacy clients. (One of my clients) raised her rates and transitioned every client without losing one.

Your first step is to write down three outcomes you consistently deliver. Then use those words to clearly communicate the value you provide to clients.

What are some signs that an accountant or bookkeeper is undercharging?

Look for signs like billing by the hour, scope expanding without a corresponding increase in fees, legacy clients who pay far less than new ones; answering questions, attending meetings or handling extras without charging and being at capacity but unable to increase revenue. These red flags keep your firm busy, but not profitable.

The first step is to review three client files and note where you provided services or support without additional fees. Those gaps highlight opportunities for value-based pricing.

How can they begin adjusting their prices without losing existing clients?

Raising rates feels risky; however, it leads to sustainable growth. Another one of my clients avoided raising her rates for 18 years. Within 90 days of shifting to prepaid packages, she raised fees by 60% and retained 90% of her clients, even her legacy ones.

The key was a three-step process. First, she communicated changes in a client-centered way, showing benefits like predictable monthly costs, no surprise bills and services bundled into a fixed package.

Next, she talked about client needs, outcomes and what success looks like to them. Finally, she behaved like a consultant by guiding them toward the best package.

A strategic step is to draft a client-centered email that explains your new model from the client’s perspective and emphasizes outcomes, not tasks or hours.

How can accountants and bookkeepers package their services in a way that reflects value, supports profitability and helps clients clearly understand what they’re getting?

Packaging helps clients understand your value and choose the level of support they need. Start by listing all the services you provide. Then group them by the problems they solve.

Create three tiers. For example, the Silver tier might include essentials like organized records for tax filing. The Gold package includes reports and proactive guidance. The Diamond level covers strategic growth, i.e., budgeting, forecasting and advisory.

Make sure higher tiers deliver real impact, not just more work. Instead of giving extras away for free, include them in the right level package.

The Net Gains is your one-stop shop for fresh, FREE accounting insights. You can reach the newsletter team at thenetgains@mynewsletter.co. We enjoy hearing from you.

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The Net Gains is curated and written by Janet Berry-Johnson and edited by Bianca Prieto.