CPA Practice Advisor - 18

THE MILLENNIAL ADVISOR

Punch the Clock:

WHY YOU SHOULD STOP BILLING BY THE HOUR
AS WE MOVE further into 2020 and further into the new normal, one thing hasn't changed.
Each day consists of 24 hours, whether you work eight or eighteen of them. As accountants,
we should be happy about that. After all, some of us love adding up quarter hours more
than we love formulas in Excel. Hourly billings, for many, is the lifeblood of making a
living. Billing by the hour is the only way we may know how to measure our value-and
generate income. It is how we traditionally relate our inherent value and to translate that
value into something numerical that compels a client to cut a check in return.
Sounds fair. Sounds like a comfortable methodology.

DUMBING DOWN OUR
EQUATION
Our logic is simple and does not follow
the economic principles that drive
our clients in their other high-value
transactions.
Think about this. They may pay
a lawyer by the hour, but they aren't
happy about it. Whereas almost all
other white color and consultative
professionals are engaged on valuebased wages or contracts. Their own
marketing people, salespeople and
finance managers are on salary. They
hire outside consultants who build
mobile applications, based on complex
project proposals.
Meanwhile, we keep tying our
value to the quarter-hour increments
at fixed rates.
We don't think about supply and
demand for what we do in a given

18

SEPTEMBER 2020 ■

market. We apply our binary per
hour formula. We don't contemplate
the special knowledge we own, nor
our ever-increasing efficiencies over
time-serving these clients, and how
the numbers of hours we need to do
that decreases each passing quarter.
We just keep billing them by the
hour, regardless of the experience
we amass at rapidly rising rates of
production

FUNDAMENTALLY
FLAWED
Ultimately, we are fundamentally
flawed. Now is the time to evolve
as the world around us grows more
accepting of a new normal. Now is the
opportunity to let go of the stuck in the
past hourly rates. Now is the time for
value pricing, to compensate ourselves
for the outstanding work we perform.
We increase value through speed,
knowledge and advisement. If we keep
charging them by the hour, our value
will forever be limited, we handicap
ourselves and the client. We penalize
both sides with fears of lost time or
being billed, to simple explore new
ideas. Value-based billing frees you and
the client to have those conversations
without fear of losing margin on your
end or getting tagged with consulting
fees on theirs.
In contrast, billing solely on time
fails to consider supply and demand
or the ultimate value of the work being
performed. On one task, you took too
long last Wednesday, and the bill goes

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up. But the end-product remains the
same. On Friday, you got the job done
in half the time it took the previous
month.
The fees may be lower one time
and not the other, while the endproduct remains the same. From the
outside looking in, you charge too
much one month versus the next. From
the inside, you saved them money
delivering the same end-product. Your
client only sees the negative variances.
What if they audit the invoices and
want everything adjusted to the lowest
costs going forward-and backward?
Start a new way of packaging how
you price with your clients today and
explain the change to your clients.

TALKING THE TALK
One major fear accountants have when
it comes to moving away from billable
hours isn't their unflappable belief in
billable hours. It is how clients will
react. This is why now is the time to
make this change. As we move into
the new normal, as people like to say,
changing how you price is a natural
part of that message.
Here are some great ways to
incorporate changing your pricing
into today's landscape.
Dear Client,
As we all see the economics around us
changing, we know it is time to take into
account your own economics. So, we are
shifting how we price our services. We are
moving away from old legacies billing you
by the hour. Instead, we are packaging our

GARRETT WAGNER, CPA

CEO/Founder, C3 Evolution Group
garrett.wagner@cpapracticeadvisor.com

services at set prices and packages.
This new approach will stabilize the costs
you see for projects and tasks that we
perform for you. You will have opportunity
to see prices these services, and a good,
better, and best package. But the prices are
transparent, so you know what you will pay
in advance and what you will get.
We will begin sharing this new approach in
the coming weeks; we believe you will find
it simpler, more clear and easier.
Now, you can follow up on a communication like this with menu-style
prices for three tiers. Call your clients
and explore how much they like the
new offerings, compared to paying
by the hour a month after the cost is
already incurred.
Clients never push back against
value pricing. They are getting clarity
on price before they purchase vs. the
unknowns of billable hours. What is
there to argue about?

WHAT'S NEXT
As you move into this new phase with
its focus on value, you can shift your
focus internally from billable hours
to how you deliver value.
At the end of the day, our success
isn't measured in quarter hour increments. We get measured by what we
deliver, its quality, accuracy and value.
No client sees you at a restaurant and
says, "You did a great job on my tax
return those 6.25 hours, way to go.
Nice labor!"
They say, "You crushed our return.
Next drink is on me."
The billable hour is a relic. Punch
the clock in the nose. Long live valuebased pricing! ■
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