Is your model broken?

Bookkeepers and accountants are two of only a small number of professions still stuck with the broken model of charging by the hour. Before you take offence at my comment, let me explain why I think the model is broken, and how we can learn from other sectors.

If we go back 10 years, almost every bookkeeper and accountant was charging by the hour. It was always done that way and it was easy. Pretty much everyone also used Sage. Things have changed in our profession though, and problems have started to emerge.

One of the biggest changes has been in technology which has a direct impact on how we charge our clients. There are a raft of new apps and time saving software. There’s the first problem… Time saving. If we invest in this technology and save time we take a hit twice. First in the cost of the tech and second in the reduction of fees through the time saved.

There are two more issues though. The first is to do with the glass ceiling. We can all agree that there are only so many hours we can work in a week. While almost all bookkeepers starting out never dream of filling these, when you do it becomes a major challenge. It doesn’t matter how hard, or smart you work when you reach your limit of time, what else do you sell?

The final issue I want to look at before we see what others are doing that we can learn from is the disjoint between what we sell and what our clients buy. I’m willing to bet that no one has ever phoned you and said “I want to buy three and a half hours of your time.” It just doesn’t happen. Clients are buying results and we’re not selling that. No wonder finding new clients can be hard work.

So, what’s the solution?

Interestingly, part of the answer may lie in pick’n’mix. Really! Those sweets you bought from Woolies could hold the secret to improving our lot. Historically, when you went to buy these you filled a bag and took it to the counter. You knew how much 100g cost, but this was the first time you actually knew how much you were going to pay. It was ambush pricing at its best. Consider the similarities with our hourly pricing. The client knows the price per hour, they may even have an estimate of how long it will take. But the first time they really know the cost is when they receive their invoice.

Think, then, about how things have changed when Candy King came along. No longer was there uncertainty. Now you had a cup and you knew before you took a single sweet how much the cup would cost you. The price didn’t change, but the psychology behind it did. This also allowed them to add a bit of psychology to make you spend MORE than you really wanted to.

The second area is in movies. Before Netflix we actually went to the video shop. We had to pay for every movie we rented. Then along came Netflix. Initially they posted dvds to you for a fixed monthly charge. It revolutionised home movie rental. It took away the cost per unit and gave certainty at a fixed price.

Think about these two very different industries and how they have become so popular. Both have done exactly the same thing but in very different ways. Both have taken away uncertainty and replaced it with certainty.

How can we do the same in our profession?

By moving away from the ‘easy for us’ hourly pricing to something that helps to eliminate uncertainty from our clients is a welcome step in the right direction. Whether it’s menu pricing or value pricing, the opportunity to truly revolutionise our bookkeeping practices is here. Like Candy King, we can add a bit of simple pricing psychology and begin to earn what we are really worth.

Thank you to Kris McCulloch MIAB from The Bookkeepers Alliance for providing this article.

You can also follow The Bookkeepers Alliance on social media via the links below:

www.facebook.com/bkprsalliance/

@BkprsAlliance

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