How to Determine Your Pricing Strategy
Exploring the Best Pricing Models for Your Business
After receiving an unexpected amount of interest regarding a pricing model spreadsheet I use for my business, as well as engaging in conversations with individuals launching new companies, I’ve realized that there’s a broader interest in discussing job pricing strategies. Today, I want to share my insights with the hope that they will benefit others in similar situations.
For context, I operate a small Bookkeeping firm in central Texas. Over the past decade, I’ve focused my services strictly on Bookkeeping and clean-up work. I don’t handle payroll, AP/AR, or specialized Accounting tasks such as construction job costing or inventory management.
Frequently, when pricing discussions arise, the conversation quickly shifts to hourly rates. Personally, I find hourly pricing to be problematic for several reasons:
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Transferring the Learning Curve Cost to Clients: Every new client comes with a learning curve. If you’re new, there’s also a learning curve with software and mastering the delivery of accurate monthly reports. Charging hourly while you learn at the client’s expense can appear unprofessional.
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Clients Prefer Predictable Costs: Clients generally prefer to know their costs upfront and appreciate consistent billing. Deviating from this principle cost me my first client—a mistake that was a hard learning experience.
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Clearer Sales Propositions: Defining your services with a fixed price makes your offerings more attractive in consultations and proposals. It helps convey confidence, reducing uncertainty in your sales pitch and increasing closing rates.
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Reduced Administrative Burden: Avoiding hourly billing eliminates the need for detailed time tracking—a minor inconvenience with few clients, but a significant burden as your business grows, especially when managing a larger team.
Why I Favor Flat Monthly Pricing
Given my perspective, it should come as no surprise that I prefer flat and flat monthly pricing models. For clean-up projects, my rates are based on total transaction volume, while average monthly transactions determine pricing for ongoing work.
To gather this data before finalizing a deal, I rely on building trust during consultations:
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For clients with existing QuickBooks or Xero accounts: I request access as an Accounting user to review their finances and determine a suitable price. This step, if granted, indicates trust and often leads to securing the client.
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For clients without established books: I ask for two months of bank statements from all business accounts. Since providing banking data is a mark of trust, if they’re willing, I’m usually able to submit
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Pricing Strategy for a Bookkeeping Business
When approaching pricing for a Bookkeeping business, it’s crucial to consider not just the amount of work involved but also what clients are willing to pay for predictable and reliable service. Below, I’ll highlight some principles and strategies I’ve developed over the years that have proven effective, especially for a service-focused business offering Bookkeeping and cleanup work:
The Case Against Hourly Pricing
Many small business owners default to charging hourly, but there are several disadvantages to this model:
Learning Curve Costs: Charging by the hour places the burden of your learning curve on your clients. As you familiarize yourself with new software or the specific needs of a client, hourly billing can lead to inflated costs without tangible benefits to the client.
Billing Predictability: Clients prefer knowing upfront what services will cost. Unpredictable billing can lead to dissatisfaction and lost clients, as I experienced early in my career.
Clear Offerings: Defining exactly what services you offer at a specific price point lends clarity and confidence both in sales pitches and in client proposals. This clarity can improve your closing rate by eliminating ambiguity.
Administrative Efficiency: Managing timesheets for yourself or your team can become cumbersome. As your client base grows, the logistical burden of tracking hours can detract from more productive activities.
Preferred Pricing Approach: Flat Monthly Rates
Instead of hourly billing, I advocate for flat monthly pricing. This model is based on two main factors:
Gaining the Necessary Information
To accurately price your services, it’s essential to obtain a transaction overview upfront:
Existing Accounting Software: If a potential client uses QuickBooks or Xero, I request an invitation to access their account as an “Accounting user.” This transparency helps build trust and allows me to assess transaction volumes and complexity directly.
Bank Statements: For clients without preexisting books, I ask for their last two months’ bank statements. This helps gauge their transaction activity and establish a clear understanding of their bookkeeping needs.
If a prospect hesitates, it usually indicates a trust barrier that needs addressing. Should they be reticent, it’s either time to engage further in the sales conversation or to move on.
As a last resort, if work is urgently needed, you can estimate based on