The Benefits of Value Pricing (and How to Do It)

November 4, 2019

Has your firm shifted to value pricing? The most recent PCPS/ National Management of an Accounting Practice (MAP) Survey found that use of value pricing approaches has soared while hourly billing continues to decline. There are several good reasons why.

It’s easier to manage cash flow. You know in advance what prices will be and there’s less anxiety about how the engagement will shape up. Your engagement letter spells out the scope of the services you will provide for an established fee, which means there shouldn’t be any surprises as long as you don’t deviate from the engagement letter scope. If there are change orders, they are treated as additions to the original agreement and priced separately.

You can do what you love. In a podcast series on value pricing that I hosted, CPA Dominique Molina talks about how she found it hard to focus on consultative work and strategic planning—the tasks she liked best—while managing a solo practice under the old hourly billing model. Switching to value pricing gave her the chance to do the things that she enjoyed and that delivered powerful results for clients.

Clients understand what they are getting. I mean not only the scope of the engagement but also the price and value of the services they are receiving. With hourly billing, clients are excited about the services but may worry about how much they will ultimately cost. With value pricing, there’s a set price. Value pricing arrangements allow you to have a conversation about exactly what you will provide, and to discuss the benefits of all that you will do for the client. You have the chance to link your fees to direct advantages for clients’ businesses, so they come away with a better appreciation for your work.

It can be a valuable recruitment and retention tool. Life will be a little less stressful for your people if they can forget about tracking hours and focus instead on service, with a set amount of work to do and a set deliverable. A more manageable and predictable workload can truly enhance staff morale and culture.

Making the switch

Even if they think they’re ready to try value pricing, practitioners will likely still have a lot of questions about how to get there. Some of my recommendations include:

  • Break with the past. It’s easy to get stuck doing something just because it’s always been done that way. Start out by embracing the idea that this will be a positive step for your practice and that the new approach will ultimately benefit the firm.
  • Identify the resistance. Many CPAs worry that clients will be the toughest sell when it comes to making this transformation. In fact, I think it’s actually a challenge for practitioners to think about putting a value on what they do and selling that idea to clients. Clients are generally accepting of the concept; you just have to package it for them so they understand what they’re getting and why it’s in their best interest.
  • Don’t do it all at once. Since there are big differences between hourly and value billing, don’t try to convert all your clients or services immediately. Start with new clients to get comfortable with the process, then identify a group of existing clients who you think will be most receptive to the idea of paying a set fee each month. As you move forward, use your experience with them as a learning opportunity to determine how best to communicate with and educate other clients. Use resources in the PCPS Trusted Client Adviser Toolbox like the Pricing Tool and  Overcoming Pricing Objections Tool to help.
  • Offer tiered pricing, such as bronze, gold and platinum levels. Clients can pick the range of services and the overall price they want. As Molina noted, that minimizes disagreements or hard feelings when clients decide they need more work done. Remind the client of their initial choice, then discuss upgrade options.

Stay ahead of change

Changes in technology and in client expectations are pushing firms to take on an advisory role with their clients. That’s good news, since CPAs are well suited to partner with business owners to address their most pressing concerns. Using value pricing to meet their needs does mean switching to a new business model, but I’ve seen small and large firms across the country successfully make the move. Those who try it and make a commitment to it never look back.

Carl Peterson, CPA, CGMA is the Association’s Vice President of Small Firm Interests. Have questions for Carl? Contact him directly at or 651-252-4618. And be sure to sign up for Carl’s free Small Firm Update webcasts. Register here for the next one on December 12 at 2:00 to 3:00 PM ET.