That quaint value pricing fad

It’s all the rage these days on accounting blogs – value-based pricing. You’ll see it everywhere, hip accountants (Who’s a hipper accountant than one who blogs? One who blogs about value pricing!) posting missives decrying the historical basis of hourly billing and extolling the virtues of pricing based on value.

What value pricing means to them, is that we should charge for our services based on a basically intuitive notion of the “value” we’ve provided. Sometimes that value is quantifiable, when you identify cost savings the client would not have come up with on their own. (These poor clients, they’re a hapless bunch to the value pricing gang.)

But most of the time it’s like pulling a number out of thin air. What’s the value of creditor-proofing? Is the value the money you save the company that would’ve gone to the creditors? How about due diligence? Surely a percentage of the sale price is the value of that!

You see, value is in the eye of the beholder. Clients will have a different value attached to the services provided than the provider does – it’s inevitable. How about advising a client against a tax plan that could potentially draw the attention of the CRA? (Aside: CRA is the Canada Revenue Agency, our IRS.) If advice is heeded and the attention diverted, where is the value? The amount the client would’ve had to pay after a tax audit?

In most cases (possibly not with the Big Four, I’ll have to consult with my friends one that one) there’s already value pricing in effect. It’s called the “fee quote.” Many of our clients – actually most – request and get from us a quote at the start of whatever work we’re doing for them, typically audits, of how much the bill is going to be. In this way, the “value” of the service to be provided is agreed upon. Isn’t this a better way to do things than generating a figure to represent the value created at the end of the job?

If the job turns out to be more difficult than forecasted, we’ll usually sit down with the client and explain what sort of extra work we’re having to do and why we need to do it. We provide an itemized list of the extra work and the extra time it required. Right the value pricing gang is choking on the bit: “Extra time? Value isn’t based on time! The billable hour is evil!”

Any way you swing it, the fee quote is the type of value pricing that both clients and professional service providers prefer, because it sets expectations at the beginning of the work and it doesn’t expose those despicable timesheets to the client. And timesheets are still very useful in determining the cost to the firm of an audit.


The [professional services] sky is falling!

If you’re into this sort of thing, you have probably noticed that about 95% of accounting related blogs are focused on the impending death of professional services firms, because of course all PS firms have lost the plot and have ceased to be useful to business.

I can’t even link to all of the accounting blogs bemoaning how horrible PS firms have become and how business no longer finds their services useful or wanted. Actually, by default I’m already linking to them in my blogroll, because by default (it seems) all accountants writing blogs hate the industry they’re in.

Maybe I’m just a starry-eyed optimist with my head in the clouds, but I’m not buying it. There’s certainly nothing wrong with my firm – client service and professionalism are cornerstones. I know it because I see it, every day. I know it because I’m doing it, every day.

And who loves an audit anyway? It’s not the management of a company that benefit from audits (necessarily), it’s the shareholders, potential investors, debt-holders, and other public stakeholders who do. I don’t want to give the impression I’m not always thinking of ways to improve my client’s business, because I am, but I’m realistic when I recognize that first and foremost we’re there to make sure the financial statements are all good.

The bottom line is this – we’re hired because of our knowledge, and we try to help our clients every chance we get. Maybe there are some bad apples in the barrel, but we aren’t all bad. And if value-based pricing is so great, the market will decide. If there are some bad communicators out there with CPAs, the market will even things out.

Let’s find something else to blog about.


Sell your services over the phone using Ether

A week ago I was trading blog posts with David Rachford about accountants marketing their professional services using MySpace. The discussion had resulted in both of us signing up with the mega-popular site in an effort to understand the potential opportunities.

Results are still out on that avenue, but out of the Web 2.0 ether, comes Ether. How it works, according to them, emphasis mine:

We all have something valuable to say. Whether you’re an accountant, a computer expert, a blogger, or a good gossiper, you can earn money selling what you say to others over the phone or through email.

Sounds like an interesting use for the new web. The step-by-step details:

  1. You sign up on the site and set up an Ether phone number.
  2. You set a price for your services, either per the hour or the minute.
  3. You decide when you want to take calls.
  4. Then you market your Ether phone number and people give you a call when they want to pay you for your knowledge.

Sounds pretty cool actually, and although I can’t see myself building a career out of something like this, I could see someone with some basic accounting knowledge (a bookkeeper, perhaps) selling it to those who need the information.

What do you think?