The 3 Biggest Pricing Mistakes Accountants are Making in 2021

2020 was such a tough year. And of course, now, as we move into 2021, things are still tough. And one of the things I'm finding from talking to accountants, talking to bookkeepers, is that they're still struggling with pricing. And I'm finding there's three particular mistakes that people are making with their pricing. And particularly in this current climate, coming out of this pandemic in 2021. In this video, I'm going to share with you three, three big pricing mistakes that we're making in the profession, which you need to avoid.

Hi there. My name is Mark Wickersham, and in this video, I'll share these three pricing mistakes. And here's the first one. The first one, as a profession, we're still pricing way too cheap. And one of the most common questions I've had over the last 12 months. So as Covid kicked in, and as you know, it's been a really, really tough time, you've probably had many clients really struggling. It has been tough for so many. And a question I keep getting is, Mark, my clients are struggling. Should I discount? Should I reduce my prices? Should I do some work for free to help my clients get through these tough times? And my answer is, no, we shouldn't be discounting. And here's the reason for it, the main reason, and that is that if you want to help your clients, you have to stay in business. If you end up reducing your prices, discounting, doing work for free, then you end up going out of business. You can't help anybody. You can't help anybody. So you have to treat your firm as your most important client.

And that means keeping the prices at the level they should be. Otherwise, you'll end up, if you go too cheap, you'll end up finding you cut corners, you are working, you start working crazy hours and you'll miss things. And also, and this is going to sound harsh, but it's a fact of life, there are some businesses out there who probably shouldn't be in business. They're not willing to change, not willing to innovate. And when we have pandemics, recessions, tough times, that's when those businesses get found out. So there may be some of your clients that it's probably better in the long run if they're not willing to change, if they're not got great businesses, perhaps they need to fall by the wayside. So no mistake, number one is pricing too cheap. We have to still keep our prices high. And that leads on to number two. The second thing that I am finding Is that right now, in this last, certainly in 2020, times were tough. I think 2021 is going to be even tougher still because there were a lot of government.

Grants, loans, tax deferrals all around the world being given to businesses, but they're going to have to pay many of those back. The tax deferrals will end up having still to be paid, the loans will have to be paid back. So 2021 will still be an incredibly tough year. But not everybody's struggling. Some clients are doing really, really well. And we have to recognize that some are doing well and some are finding it tough. But they have great businesses still and they just need you to help them get through these tough times. And what's interesting about tough times, whether it's the pandemic, whether it's recessions, is this is an opportunity for us to do more for our clients, to add more value, to help clients get access to that funding, those tax deferrals, to help the clients fix their cash flow, to get through these tough times. And when we add more value, when we create more value, then we should price based on that value, which means we absolutely must be pricing based on the value, not on how long things take. And I'm still seeing people price based on the hour. What we should be doing is focusing on how can we add as much value to the clients as possible. Not every client, because some clients might be doomed to failure and we can't save everybody. But some clients have great businesses and we should be looking at ways to add even more value, but then price based on value. If you want some help with value based pricing, I'll put on the screen here a link to another video which will help you understand how we shift to value pricing. So the third mistake is this. The third mistake that we make is we've shifted in our profession. As many businesses have as, as Covid took hold, as we had the pandemic taking off, as we were working from home more often, we've had to change the way that we work. Perhaps you have employees and they're now working from home. We're now having online conversations with clients. We're using tools like Zoom, like Microsoft Teams, and we're using other technologies. And what happens is, as we change, as we innovate, as we learn and use more technology in our business, like online meetings, we create efficiencies. We create efficiencies in our business. When we create efficiencies, we can do things faster. It takes less time. And one of the mistakes that the profession is still clinging up onto is billing pricing based on the hour. And the problem with that is if we're pricing based on how long the work takes, and yet we're now introducing these efficiencies, for example, online meetings, which means that we can be much more efficient in having a conversation with a client because we're not having to travel, we can just get straight to the meeting. You also tend to find that online meetings are more efficient. We get to the point quicker, they're shorter than physical meetings. And so as we're reducing the amount of time it takes, as we're increasing the efficiency in our focus.

Then we should not be reducing prices. But that's what happens with hourly rates. If we can do things quicker and we're billing based on how long it takes, then that means when we invest in technology, in training, on learning how to do things better, ultimately that means we are pricing less. And yet the values not changed. We absolutely mistake number three, we must stop pricing based on the hour. And I'll give you another link to a video which gives you you some more reasons for doing that. This change we've gone through in 2020, 2021 is making us reassess the profession, think about how we work. And it's been a catalyst and now more than ever, it's important to recognize that we need to focus on value, price based on value, and drop the billable hour. If you found this valuable, please hit that thumbs up button and I will see you on another video soon. Bye for now.