This is the story of Carol Kostachuk who is now much more confident with pricing. She knows she does not need to win every client and she uses a meeting fee to pre-qualify.
If you would prefer to watch the full interview, you can find it on my YouTube Channel here: https://youtu.be/O7nxDdBzyOU
Carol is based in British Columbia, Canada, and has been in business for over 24 years. She started in a position where she was doing administration and bookkeeping. But Carol was working crazy long hours, going to work at 5:30 in the morning and not getting home till 5:30 at night.
Then, when she was off on maternity leave, Carol spoke to her friends that were already in the bookkeeping business right out of school, and during her maternity leave she started her own business.
Since then, Carol has completely transformed the way that she prices from the old-fashioned way of time-based billing. I spoke with her recently to find out all about the success she’s been having.
I asked Carol about the challenges she had faced with pricing. Carol told me that, “Looking back, I would have done things a lot differently.” Carol essentially took the hourly rate that she was being paid in the corporate world and used that to start her business.
Carol realised very quickly that she wasn’t getting paid a lot of money and needed to increase that price. But she stayed at that hourly rate because that was the only way she knew how to price in the accounting world. You worked for a period of time, and then did an invoice, sent it off, and waited to get paid.
I asked Carol when she realised that something had to change and she said, “As time went on my rates increased. But I was working with a client as we went through our annual review, and it was more like I was asking for an increase as opposed to stating what my fees were. That mentality didn’t change until I met you. I was listening to your talk at Intuit Thrive in December 2015, and we chatted, and I thought ‘I can do that? I don’t have to price hourly?’ It was a lightbulb moment.”
When Carol next had her annual review with the client, she noticed she had changed her mindset from thinking of her salary as an hourly wage to thinking of it as a fee. She felt more in control.
She still has that client today, and Carol said that the rate she charges him is vastly different than what it was.
Carol said the biggest difference for her in terms of practical steps she took to improve her pricing was re-doing all of her brochures and information. She also used Effective Pricing to develop a monthly fee based on the value that she was delivering as opposed to the work she was doing.
I asked Carol if it was difficult involving the client in the pricing process. She told me, “The biggest challenge I’ve had over the last few years is when businesses who have always been on the hourly rate move to a monthly fee. I had a client who said, ‘Can I think about it?’ And when he came back, he said, ‘I’m just not understanding.’ He was trying to figure out what it was hourly. I explained, ‘We don’t do hourly. We do a flat monthly fee based on the results we’re going to provide you.’”
Carol said, “It made it easier for me to realise that this is the way it is. If the client or prospect can’t wrap his head around that and still wants hourly, then he’ll need to go and find someone else to work with.”
Carol lost a couple of clients in her repricing process. But she told me she was happy for them to go.
She told me about one client who she renewed in April, and the rate went up drastically because the volume of work had increased so much. They had to have a couple of discussions because he didn’t quite understand how this increase in volume made a difference. Carol said, “I literally had to take it down to transaction base for perspective. So, I said, for example, ‘When we first priced you, you had 70 transactions a month. Now you’re at almost 300.’ That took the price from $868 a month to $1300 a month. And I charge him extra to fix the invoices that he sends me incorrectly.”
Carol found that using Effective Pricing made it clear for the client what the scope of the work was, so the pricing conversation was then easier.
Originally, Carol used to carry out a discovery diagnostic for free. She would find out all the client’s problems and then they would go away, and she’d never hear from them again!
Carol recognised she should be charging for this service. She started out at $150 but soon realised this was still way too cheap. By only charging $150, Carol attracted the type of clients that could only afford $150, and those weren’t necessarily the type of clients she wanted.
Carol told me, “Now I charge $500 as my base price. If you can’t afford $500 for me to look at your books, to see the problems, and tell you how I can help you, then we don’t even start. And I’ve just met with a prospect who is a client now, and, because of the volume of the revenues, I actually charged him $750 per file, because he has two companies.”
I asked Carol whether through this process she ends up losing a lot of business, and what the quality of clients she does end up signing up is. She told me that the clients she loses are frankly ones she’s not interested in starting to work with.
Carol said, “I did a diagnostic for a lady at $150 and we didn’t even get to the pricing software. She told me that her current accountant only charges her $75 a month. I just tried not to laugh because I was thinking, who is this accountant that’s doing your books for $75 a month? She can’t be charging more than $25 an hour, because it has to be a minimum of 2-3 hours work! So that was the end of that conversation because of the amount she was expecting to pay.”
It was great that Carol could be so upfront with her prospect and say, ‘I can’t do it for that price.’ We have to stand our ground with pricing. If you price too low, something has got to give and usually people cut corners.
Carol told me she understands why clients are sometimes shocked at her price, but that once they see the results she provides for them, they’re more than happy to pay that amount.
I asked Carol how her life was different now compared to where she was back in 2015. She told me the biggest difference was that she charges vastly different rates and so gets vastly different clients. Carol said, “The quality of clients I get is much better. I’ve been able to decide who I want to, and who I don’t want to work with just based on the discovery diagnostic.”
Carol also now uses a pre-qualification process to decide if some prospects are even worth having a discovery diagnostic meeting with. She sends a couple of questionnaires before the meeting to make life easier for both herself and the client. The answers she gets from that tell her whether she even wants to take them on as a client or not.
Because of these changes, Carol’s revenue has more than doubled. But even more importantly than that, Carol said, “I’m not constantly worrying about that hourly time. I’m not tracking every single hour.”
Carol shared with me her 3 top tips based on what she’s discovered over the last few years with pricing. She said:
Watch the full interview with Carol here: https://youtu.be/O7nxDdBzyOU
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Wishing you every success on your pricing journey.
Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”
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