Cost VS Value - Why You Shouldn’t Lower Your Prices.
Let’s talk cost VS value. Too often we approach our business apologetically. The “client is always right” approach to service based businesses can be a wonderful thing. We should treat our clients with the respect and dedication they deserve.
But we can also approach business confidently, and talk about our pricing confidently, when we know we not only offer a good service, but good value and the results our client is looking for.
Let’s Define It.
Cost - Put simply, the cost is the price of getting a job done. It’s cut and dry.
Value - Value refers to how much we appreciate something, its worth, usefulness and importance.
What Is the Difference Between You and Your Competitor Down the Street?
It’s you. You are the difference between you and your competitor.
The guy down the street might be able to do the “work” but is he someone that your client wants to deal with?
YOU are the best point of difference in your business.
Being able to get along with the people you work with - speaking the same “language” as the people you are working with?
Sure someone down the road offers a similar service at a lower rate. But can they sustain that? And do you want to work with someone offering a “cheap” service?
Don’t Discount For Someone Who Doesn’t Care
Your ideal client is going to see what you do and value what you offer.
Someone who doesn’t value what you do? They’re not going to want to pay. But is someone who doesn’t want to pay really someone you want to work with?
You offer value for the time, expertise and the network of relationships you’ve accumulated over time.
The right client will value what you do and will see the benefit of working with you.
So How Do You Price Your Service?
There is a lot to consider. Here are a few things to keep in mind…
As a starting point, the sales from your services need to cover your costs and then some - this is how you make a profit.
Understand your cost to deliver your service. You need to be covering your costs! This is what we call “break even”.
Know the direct costs associated with delivering your service - we’re talking wages, disbursements (think costs paid on behalf of the client), etc.
Know your overheads - these are the general costs of running the business. Think rent, equipment, insurances, workers compensation, WHS, taxes, etc.
Understand your profit needs (and wants). Your profit should cover:
Any loan or bank repayments;
Provide for your personal lifestyle costs; and
Allow for savings for future growth / expansion plans or for building your personal wealth.
Other factors you need to consider could include:
The value and insights you have accumulated over years of experience and through your hard earned qualifications. Yes, it may only take you 30 mins but you have spent the last 10 years practicing your craft so that it no longer takes you days but minutes to deliver.
Perceptions. Are you offering a boutique, premium service or a highly accessible, low cost service. You could work with 100 clients at $5K each, or you could work with 10 clients at $50K each and receive the same amount in fees. Determine who you are trying to reach and what you are offering. It is important to align your pricing with your offering and point of difference.
How do you compare to your competition? You should do your research around what the market rate is for a similar service.
We’re Not the Cheapest Accountants. But We Are Damn Good Value.
We are priced competitively for the service we offer. We know this, because we’ve checked.
We work closely with Slipstream Group, who coach accountants and financial advisers all over Australia and we know our prices are competitive based on their wealth of data, research and up to date information.
We also know that while some accountants offer their services at a lower price, we are priced so that our clients are important to us.
Picture this - one client is priced at a lower rate, but they want the same service offered to a higher paying client. Are they likely to get that same prioritisation long term? Or will they likely get sent to the bottom of the pile to be dealt with later?
Or perhaps a lower priced service provider takes in such a large amount of new work they can’t keep up and so the level of service drops off.
Accountants Who Actually Give a Crap About Your Business.
We’re here to help you grow your business, without the fuss.
Make sure you have the right people in your corner. Us.
We love partnering with driven and ambitious business owners, to package up all your business needs.
