Part 1 – Why Subscription Pricing Matters
Over the next few posts, we’re going to give you a step-by-step guide to subscription pricing.
We’ll break down subscription pricing packages and why they can make a drastic difference in your firm cash flow for 2021.
The last 3 years have been one of the most challenging spans of time this industry has ever experienced.
First, the Tax Cuts & Jobs Acts (TCJA) was the largest change to tax legislation in decades and now the CARES Act has created a firehose of new needs for business clients.
The owners of small tax & accounting firms are doing their best to help their clients during this period.
But there’s one huge aspect of these challenges many small owners firms still haven’t fully addressed yet…
How your pricing should be adjusted to align with today’s new environment.
Right now you’re being forced you to:
- Answer more questions than ever from clients
- Work harder to explain how stimulus strategies could affect their tax picture
- Do additional planning & projections to improve client outcomes whenever you can
- Invest in additional training just to do your job!
Add to that, simple 1040 returns are moving to “self-prepared” at the highest rate ever, so you’ll need a way to replace that revenue.
If you haven’t thought about or updated your pricing structure to account for all this – then the core revenue model in your practice might not hold-up in the near future.
So how do you successfully adjust your pricing to align with today’s environment (and all the after-effects) without losing revenue, alienating clients, or going insolvent?
For most firms, the best approach is starting with getting paid for all the help you’re currently giving away for free.
The easiest way to do that (in many cases), is by adding to a subscription model where clients pay you automatically once per month (from their credit card or checking account).
Subscription-based “Pricing Packages” have been around for decades in other industries and the tax and accounting space has embraced this model as firms experience the benefits.
However, it’s not for every practice. Because it’s a “newer” pricing model in this industry compared to traditional hourly and per-form billing, you may not be sure if it would be a good fit for you.
The good news is, identifying if adding a subscription model would be beneficial, can be easily done if you focus on the right analysis.
Here’s the key take away from Part 1 of this guide:
|Subscription pricing should be a profitable add-on to your current pricing menu. |
It should not be an “all-or-nothing” switch.
When many firms think of the subscription pricing model, they believe it will replace all other pricing options they offer clients.
Data shows this is not true and in fact, trying to switch your pricing model with every client at once leads to poor results.
Your pricing menu – the options you offer clients for engaging with your firm and paying for your services, should have options that align with the needs of the specific client types you serve.
Just like a doctor doesn’t only use a single treatment method for all patients (sometimes drug therapy, sometimes surgery, something physical therapy with diet control, etc.) – you don’t deliver the exact same value to every client.
Some of your clients need a simple 1040 prepared and filed, some of your clients need complex business strategy planning, others need help with IRS Resolution or setting up their accounting.
So your pricing menu should allow you to align your pricing strategy with the needs of the type of client you work with. There are pros and cons to every pricing strategy, so your job as the owner of a firm is really to identify when you should use a subscription pricing model and how to do it successfully if you choose to add it as an additional option to your pricing menu.
By adding a subscription pricing option:
- You automatically cover the value that normally slips through the cracks in your client relationships – you think you’ll “up-charge” the client’s next tax return when you spend 3 hours with them in August, but you get busy and stressed come March, so you rarely do.
- You can focus on helping the client achieve better strategic results without feeling like you need to track every minute of time you spend on their work.
- It increases client happiness because they can agree to a monthly price, don’t have a great big bill once a year, and know they’ve already budgeted for the help they really want above and beyond their tax filing.
You should still utilize other pricing options on your menu, but they must align with the value you’re delivering and the results the client is trying to achieve.
Hourly Engagements or Retainers
- This pricing option aligns with client needs that you have never seen before and thus cannot predict the steps, time, and results that are needed to deliver the desired outcome of that engagement.
- The downfall of this pricing option is it puts you in a naturally adversarial position with the client – the client wants you to work as quickly as you can so their bill is the lowest but you need as much time as possible to deliver the best results.
Fixed Fee & Upfront Billing
- This pricing option aligns with clients that have a very specific need that you’ve seen “1,000” times and you know exactly what steps, in what order should happen, and how much time it’s going to take. For example, helping a new client set up their business on QBO or getting their LLC or Corp filed with the State. Because you’re completely familiar with the process, you can charge an upfront fixed fee and you’ll solve the client’s needs and make a profit.
- The downfall with this pricing option is obviously “scope-creep” – you and the client agree to a fixed price but unaccounted for variables cause you to spend more time or give away more value than originally estimated. This is why “strategic” work with clients (planning work) is best set up on a subscription model because it allows you to continue to get paid for your value regardless of what strategies need to be implemented at what times.
By using a pricing menu that has all three options: Hourly Retainers, Fixed Fee & Upfront Billing, PLUS Monthly Subscription packages – you’re giving yourself the best odds to help clients and still protect your profits in today’s challenging environment.
So should you add a new subscription pricing option to your menu? Check-out Part 2 of The Subscription Pricing Guide to find out! We’ll deep-dive into what to analyze inside of your practice so you can identify a concrete answer.
P.S. If you are ready to jump-start your firm’s Pricing packages right away, you can register for our FREE Course – How to Launch Pricing Packages that Work.
To your success,