Value Pricing -- An Art and a Science

Source: Partner's Report

Wendroff & Associates — a five-year-old firm based in Arlington, Va. — shares its experience making the transition from a billable-hour model to a fixed-pricing model. The firm offers tax consulting, outsourcing, and CFO services. About a year and a half ago, the firm began to explore ways to package services for a single price. Today, between 70 percent and 80 percent of the firm's revenue comes from fixed-price arrangements. Clients appreciate knowing the cost up front, which allows them to make informed decisions and eases the budgeting process.

Pricing jobs accurately involves both “instinct” and “science,” according to managing partner Brian Wendroff. The firm has developed an internal bidding checklist and internal spreadsheet to ensure that its professionals ask the right questions and understand exactly what's involved.

A big challenge for the firm has been dealing with disorganized clients who walk into the office with a box of receipts. To make fixed pricing work, the firm offers hourly bookkeeping services and a template clients can use to organize their own tax records.

Like many firms that offer fixed pricing, Wendroff continues to track hours for each project “to keep costs under control.” As the firm's professionals gain experience with fixed pricing, “they are getting smarter about who they offer fixed-price services to and at what price.”

For the complete article, read “Case Study: Wendroff & Associates — How a New Pricing Model Helped ‘Double' Revenue.”

From Partner's Report, The Monthly Update for CPA Firm Owners, Institute of Management and Administration, Inc., [email protected], October 2010, p. 1.