Although people often think that the quickest way to grow their accounting firm is by keeping prices low, today I'll explain why being cheap can actually lose you customers.
To prove it, I'll start with a quick story. It dates back many years to when I’d first started to learn value pricing in 2000 or 2001. I’d been asked by a limited company if I could do some quite complex tax planning for them, work involving group structuring overseas and so on. As I came from a tax background though, I felt confident I could deliver.
The company asked me to create a proposal and a price. I’d already started to learn about the importance of building value, and so I created a proposal that included five or six pages of detail of what I could do for them.
However, it was only when I won the business that they revealed they'd been shopping around. In fact, one of the other firms they’d talked to was one of the Big Four accounting firms. The reason I won the business, they said, was because of the detail l went into, whereas the proposal from the much larger firm was a single page.
What was even more interesting – from the point of view of pricing – is that my price was also more than double that of the Big Four firm! The client chose me, however, because of the detail I went into as to what I would do, and how this would benefit them. It meant they saw me as more of an expert than a top four firm!
I’m sure you’ve noticed how in life we associate price with quality. We assume that if something's cheap, it's low quality. On the other hand, if something's expensive, we assume it's high quality. But what's interesting when we’re thinking about pricing is that most people prefer high quality. By keeping our prices low, we’re simply sending out a signal about the quality of what we do. A signal that will put off all those serious business owners who are looking for a good-quality accounting professional.
In my experience, more expensive businesses actually win more clients and grow more quickly. Take Apple. Just think about the explosion in market share for their products over the last few years – despite them being the most expensive on the market. Or consider the explosive growth Starbucks went through – despite their prices. That's because people associate price with quality.
So please don't price too cheaply. I promise it won't win you any more business. It’ll simply make sure you don’t win any high-quality clients.
You can watch a video where I go into more detail here. Or, if you found this post helpful, please share it with your colleagues or let me know in the comments section below.
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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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