So you outsource accounting tasks and you almost immediately begin to enjoy the benefits of the low overhead, the ability to expand your services, and a lot of extra time that you can use to build your firm. But herein lies the potential pitfall – did you pass on those lowered overhead figures to your clients in the form of lowered prices?
Pricing is always going to be a bit tricky. It depends on so many factors – if you’re serving a niche, if you’re serving an urban centre versus a more rural clientele, do you work with individuals or do you offer services to big businesses? The list of determining factors goes on and on.
The thing to remember is that when you outsource accounting the ultimate benefit isn’t those lowered overhead costs… it’s that you’re given the tools to grow. Outsourced accounting is a fantastic tool ultimately geared towards expansion and growth.
However, this growth can be negated if you start to lower your prices. You perhaps have to lower prices in order to stay within the same ballpark as your competition, that’s one thing. But what we’re talking about here is passing on the savings that you earn when you outsource accounting to your clients.
Why is this a problem? Because you’re telling your clients and the potential client pool that you’re basing your firm’s value to them on price. And that is not a move that signals to clients that your firm has a wealth of expertise to offer them.
Pricing according to your value
If you’ve only recently upgraded to outsourced accounting services you should be fine if you leave your prices where they are. Your clients won’t be hit with any price increases, and you’re able to get to work on building up your firm so that it can offer your clients more expertise and services. It’s a win for both sides of the relationship.
But here’s what we suggest as you continue building on into the future. You’re probably already well aware that with all the DIY software out there a lot of people are doing their own taxes and basic bookkeeping. Your firm has to do more. Or, putting it another way, your firm has to find additional ways to bring value to your clients’ businesses and lives.
That’s why pricing downwards, even after you’ve begun to enjoy all the benefits you receive when you outsource accounting work, is such a slippery slope. If your firm’s singular claim to fame is lower prices, then you’re always going to have the lowest prices in order to stay valuable in the minds of the client pool.
You’ll have to become a volume gristmill, cranking through more and more compliance work in order to just stay afloat. All of the time you freed up by outsourcing will be spent trying to cast as wide a net as possible to bring in more clients at low prices. You’ll be doing a lot more work for reduced rewards.
And it’s not inconceivable that another larger firm can price you right out of existence just be lowering their prices low enough to pull your gristmill clients away to a point that you can’t match and still stay viable. Once your firm is out of the picture they can simply bounce their prices back up and not have to worry about competing with anyone in a price war again.
Outsource accounting to boost your value
Instead of racing other firms to the bottom, put all of those outsourcing benefits back into your firm. Add expertise. Create seminars that you can hold for clients or potential clients. Use it to create a social media presence that dwarfs your competition. Create packages designed to be valuable to niches.
Don’t lower your prices. Increase your value, and charge accordingly.