How Much Can I Charge As A Fractional CFO?

Hey, guys. My name is Charles Lykoff, and in this video, we're going to go over the perfect pricing for accounting, bookkeeping, and fractional CFO clients. And so everything that we're going to go over, I'm going to show here just briefly on the screen. So there's plenty of things to go over, and exactly what they mean. I'm going to get into that in just a second. But why perfect pricing is so important is oftentimes I have people that come to me and they're like, charles, I want to do fractional CFO services, or I have bookkeeping clients or accounting clients, and I'm not making as much as I want to. I'm working a ton, or I'm not working enough. And everybody that comes to me is not earning what they want to be earning. And so when you have the perfect pricing, it really fixes all of that, right? It's a lot easier to grow a business when you're priced correctly instead of your price incorrectly. And then changing the pricing when you. When you've already have existing relationships with people that is not proper or not like the right amount, um, changing that can be kind of hard. You can definitely raise prices, but it's always easier to start off on a good foot. And so we want to get you to be able to scale your firm. And so that's why pricing is really, really important. Because at the end of the day, we don't really work like we work for ourselves, but we're trying to get out of the corporate life or get kind of rewards that other people can't get. And if you're not priced correctly, maybe you can't grow the size of the firm you want. You can't get people working for you because you can't afford to pay them. And, you know, you can't enjoy the time with your family that you really want to because you're working all the time to make not enough money. And so we're also going to go, what exactly? Perfect pricing is, whether it's value, whether it's cost, revenue levels, whatever, whatever that looks like. We're also going to get into, like, what happens if we don't price correctly? Right? And that's. That's really, really important. And what happens if we do price correctly? So what I'm going to do here is I'm going to bring up screen and I'm going to go over exact pricing. Now, we have a theory when it comes to pricing, and I want you guys to kind of go along with me. On this, right? So this theory is there's pricing is kind of a spectrum. And so here, this line up here is at the top of pricing. So at the top of pricing I'm gonna make this a little bit bigger so you can see it. So the top line of pricing, what is up here is the most you can charge. And this is value based pricing. Value is up here. So that's, that's kind of the high end of the spectrum. On the low end of the spectrum down here is your cost plus margin, plus, plus margin here that's like the lowest you can charge now. I mean, I guess you can charge less than that, but I don't recommend giving away services for free. Right. So if values up at the top and cost plus margin is up, down at the bottom, what, what happens from there right now? Value, if we want to be as literal as possible, if you create $100,000 worth of value, the most that you can absolutely charge is 99,099. Now is that a super deal for them? No, not really. But you're, you're still charging them less than the amount of value that you create. So we're going to put that line right there. So that's the most you can charge. Now what happens if you charge above that? What happens if you charge above that? This puts us in the danger zone, right? If you ever heard of Kenny Loggins Top Gun, this puts you in the danger zone. You don't want to be there. And so anytime that you are in the D zone, you get upset customers, you get refunds, you get chargebacks, you get people who don't want to interact with you, you get people who cancel. And so that's really important. You never want to be charging more than the value you're creating. And so that is really, really, really important. So usually people don't have their, this issue. Usually they're way below they're down here. But we're gonna, we're gonna talk about that. So the most you can charge is the amount of value you create minus $1. So I'm gonna write here most you can charge. Most you can charge. And so I'm gonna, I'm gonna go over, you know, what to charge here in a minute, but I wanna, I wanna kind of break out this spectrum for you so it makes a little bit more sense. So this is the most you can charge now. The least you can charge. I mean, I guess you can do it for free or I guess you can pay people for it, but we're talking about the realms of sanity here. And so the least you can charge, or at least we recommend least you can charge down here. And so if the most you can charge is up here in the danger right of the line of the danger zone, which is value, and let's just say you're creating $100,000 of value, you can charge them $999,000. Boom, that's $1 value. Granted, this is not trying to scale here. Now the least you can charge is cost plus margin. And I want to explore that a little bit because I talk to people all the time and, and they can barely live off of what they're charging. And you know, I've talked to people who have, you know, an insane roster, work 90 hours a week and take home, you know, 100 grand a year. Well, first of all, depending on your cost of living, that's actually not a lot of money. Like if you live in Manhattan, that's not a lot of money. Three equals 3,000 to John, 2,000 to me. So this is a good example of what we want to do. So the least I like to recommend people is cost plus markup of 3x. I don't know why it's not putting up on the next line, but that's fine. Cost + markup 3x is defined as total cost to get someone else to do the work. We just put software cost will mark up 3x. And so this is when an example, but sometimes you can't just charge 3x what you're already going for, right? Oftentimes there's lots of labor that you can get, whether it's overseas or whatever else, even if it's not. Like you can definitely get Americans to do work for 30, 50, 70, $100 an hour, and they're happy to take it. But you can definitely charge 3x. So what I recommend, the minimum is 3x. That leaves plenty of room to you to do account management, signing on new people, paying for customer acquisition, etc. So let's look if we do something different, right? You want to hire John, right? Say he's still there, but say it's five hours and say client still gets billed a thousand, 500 to John, 500 to me. So here you're just cutting the hours that you're doing the labor, right? So maybe you're getting more efficient, you're cutting out some scope or set better boundaries, whatever it may be, right? Client still gets billed the thousand dollars. 500 goes to John, 500 goes to you. Okay. The bad, right? And so here's example. 3 here's example 4, and this one is my favorite. Less hours, charge more. All right, so say we do five hours at $100. So it's 500. Whoops. Not 5500 there, but let's just say client gets billed 2000. And so if we look at this, it's 500 to John, 1500 to me. And so if we look here, there's this example, this example, this example, and this example. So this one is a losing example. You don't, you don't want this. You might never ever get John in here. And if you do get John in here, you're losing money. So you're just subsidizing his job. Numbers of winning example, right? You're, you're billing significantly more. Number here is you're still billing the same amount, but you're reducing the hours. You're getting better at scope. This is why having a really important offer is the most important, because you're not going to be, you know, branded super high on scope, right? Actually like efficient hours. And then here is when you pull both levers, right? And so maybe you don't have to raise the prices as much, but you're still able to walk away with a fair amount to you and still look 3x. Right. And so the margins are, I guess, technically better, right? 500 to you, 1500. 500 to John, 1500 to me versus, you know, just 2000, me versus a thousand to John. And so here you actually can charge less, still take home more. So that's why, like structuring what you're selling it, just as important as selling it for the right price. And so that's why pricing and offer kind of go hand in hand. We're not really going to talk about offer here, but I wanted to give these four examples. So we're going to go back up to here. So if the least you can charge is cost plus markup, the most you can charge is value. If above, that's a danger zone. Below, that's the danger zone. Right? Danger zone is exemplified by this here. At the very least, well, what you really can charge them is what can they afford? And you're going to find out what they can afford simply by going through the sales process. And if you don't have a good sales process, again, we help with that. Happy to talk about that. Just book a call with me or my team, partnersgroup.com call. But here's, you can see what they can afford. And so if they can afford up here, boom, charge them on the higher end. Of spectrum. Granted, $99,999 is pretty too close to this 1000. So let's focus on what they can afford. And so this is how I kind of down from getting the, the perfect price. Why it's important here. What happens if you don't do it? What happens if you do it? And so let's, let's just, let's just look at this, right? Like weapons, if you price correctly. So price correct sexual get the hire John. So that's cool, right? You have other people working for you. You get less time at work if you're good at hiring and good at directing people and have the right offer or time at work or for you because it's scalable. Usually the clients that pay more usually treat you better, right? My, my clients who are on the lower end of the spectrum are more to handle than my clients that are on the higher end of the spectrum. The ones that pay me more money per month, they're really easy to deal with. So ea to scale, better clients to work with. So this is what happens if you're priced correctly. Now if you are priced incorrectly, let's, let's look at that. So price incorrectly. A can't hire John or John costs you money and hire John slash costs you money. Less time at work. More time at work. There's less money for you if you're not priced correctly. It's almost impossible to scale because you're only limited by the amount of hours that you can work. AI and these tool of these tools will only ever get so good the less the rest of it is determined. I mean on your pricing. So you know to scale and if you're not priced correctly, let's be real, these clients are terrible to work with. I don't know if you have ever had any terrible clients. I have and I don't like it. So I like to be over here in the price correctly kind of box. So this is what happens if you price correctly versus price incorrectly. All right. And this has been my training on perfect pricing. Now this has been helpful. You can do two things. You can click the subscribe button below. I'll put a link down somewhere in the description or you can go to profitsurge group.com call and if you go to there, what's going to happen is you're going to learn exactly what the perfect price is for your clients. How to sign on more clients and how to keep them longer and how to even dive into the world of fractional cfo. That's exactly what me and my firm does. So if you want more information on that, just go to profitsearchgroup.com call or look in the description below and we'll see you there.