Accurately pricing your advisory services

Determining the right pricing strategy for advisory services is a science and an art. It involves an understanding of your clients’ unique needs, the complexities of their business, the value your firm is offering and bringing to the table, and the competitive landscape.

In this blog, I’ll delve into the essential aspects of pricing advisory services to help my tax and accounting peers navigate this crucial aspect of their practice. These are the processes I use in my firm, Executive Financial Partners.

Understanding the client’s needs and complexities of their business

This is the first step in pricing advisory services.

Here’s what I mean: Does the client have certain unique aspects to their business, such as inventory, software as a service, project costing, and/or sales tax? If so, you’ll need to perform a thorough assessment of their business, as well as the advisory services you’re offering to them. Are you going to offer financial planning, tax optimization, audit support, or business strategy consulting? The complexity and scope of these services will be instrumental in determining your pricing structure. It’s typical for there to be an upcharge for some of these complexities and services.

Understanding the value you are offering and the cost of expertise!

Today, most firms have moved away from charging hourly, and are more focused on a fixed- or value-based pricing model. While hourly rates provide transparency, they might not always align with the perceived value of the services you are providing. Value-based pricing, on the other hand, ties the cost directly to the impact of your advice. It’s often a more compelling approach for clients who want to see a clear return on their investment. There’s also the subscription-based model to consider.

Some of the considerations I share with prospective clients is to consider the price tag of a strategic CFO or even a transactional CFO if they were to hire for this role. That usually helps them appreciate the fractional investment for these services.

Advisory services often require specialized expertise. Your pricing should consider your qualifications, certifications, and industry experience. Clients are often willing to pay a premium for the assurance of working with an expert and seasoned professional.

Assessing the market

Understanding your competitive landscape is also important. It’s important to conduct thorough market research to gauge what other advisory service providers are charging for similar services. This will help you establish competitive, yet profitable pricing that reflects the unique value you bring to your clients.

In addition, you will want to maintain ethical standards in pricing. Avoid any practices that may be perceived as price gouging or overcharging. Pricing should reflect the genuine value you and your firm provide, and transparency is key to building trust with clients.

Evaluating your pricing strategy regularly

The accounting profession is continually evolving, with changes in regulations, technology, and market conditions. It is critical to periodically review and adjust your pricing strategy to ensure it remains competitive and reflects the current state of our industry. The key is to strike a balance between profitability and fairness; this will help you navigate this aspect of your practice successfully. Remember: Pricing is not static. It’s an evolving process that should adapt to your clients’ needs and industry dynamics.

Editor’s note: This article was previously published by the CPA Practice Advisor.