Is Your Price Right?
Source: Accounting Today
By cutting costs during the recession, CPA firms have achieved pretty good results, observes consultant Gary Boomer. Now, he says, firms should shift their focus to the revenue side of the equation. After all, he notes, a one percent reduction in labor costs produces a one percent increase in net income before partner salaries, while a one percent increase in revenue generates a three percent net income boost.
One of the most effective strategies for increasing revenue is to increase prices, but there may be resistance within a firm. This resistance stems from the belief that value is derived from the amount of effort put into a task, when in reality value is determined by the client. Pricing services appropriately requires firms to focus on enhancing the client experience and doing a better job of communicating value to clients.
Many firms also make the mistake of treating pricing as an administrative function, even though pricing is an art, not a science. It's also a mistake, Boomer says, to leave pricing decisions to individual partners, which can result in inconsistency and, often, lower revenues.
Boomer offers five steps for boosting revenue:
- Put one person – a “chief value officer” – in charge of pricing.
- Be sure everyone in the firm understands the economic impact of even a modest price increase.
- Explore new service opportunities with your top clients.
- Communicate the firm's value to clients, and ask for referrals.
- Focus on talent development. If you develop a reputation for doing so, attracting and retaining people will be easy.
For the complete article, read “Change your focus and improve profits.”
From Accounting Today, July 1, 2011, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.