Fixed Pricing and you.
Have you wondered what Fixed Pricing means for you and your business? Or even wondered what is fixed pricing? And what does fixed pricing mean for you as a Bookkeeping Business owner, and your clients?
Is it just a fad, that seemed good at the time, like mullets and fingerless lace gloves, or is this a viable or even a superior strategy for getting a great deal for you and your clients?
What is Fixed Pricing?
Fixed pricing is a billing system that makes cashflow smooth and predictable for both the Bookkeeper and their Business Owner clients. With an hourly rate, if you are doing exactly the same amount of hours every week, then you will essentially get a fixed amount of money for your hours each month. But what if your hours are up one month, and down the next? Well, that means you are going to get paid a lot one month – yay! and paid less the next month – boo!
And your client is going to get billed a lot one month – boo! from their perspective, and billed less the next month – yay! from their perspective. This concertina effect is annoying when driving in traffic, and annoying in paying your bills.
Has anyone ever spent money they thought was theirs, and yet got hit with a higher than expected bill the next month? It's not a nice feeling, and having predictable billing makes life easier for both the Bookkeeper and the Business owner. Delaying gratification is an important part of growing up, from being a child to being an adult. But sometimes when we're flush with money, and don't realise there is an impending bill (or double bill!) we splurge with our money, and then uh-oh reality kicks in and that sweet extravagance we indulged in can taste a little sour on reflection.
What it isn't
This isn't an opportunity for your client to heap extra work on you, far exceeding what you'd priced your services at. This is a billing system where you and your client agree that for a certain amounts of hours and work getting done, you are getting paid a certain corresponding amount. If your client is consistently going out of scope, you need to renegotiate with them. If you have a client who continuously tries to get more than they pay for, in my opinion, you need to address that with them. They can either take on board the constructive criticism and change their behaviour, or they are actually showing that they don't value you and the value you provide for their business. Do you really want to continue working for clients who treat you like that? I know I don't!
What does it do
How it helps you
Have you ever felt bad about billing a client for work? You've done the work, but thought it seemed a bit trivial to invoice them for it? Or have you ever not switched on your timer, because the task was only “a small thing”? Well, in that moment, sure, it might mean little. But life is a whole series of little moments, and before you know it, your oldest child is going to the next level of Schooling, or entering the work force, or getting married, or having children, or, or, or.
Will you suffer terribly if you don't get paid for all our your work? Probably not. But why would you not take your fair share, that you and your client literally agreed was a fair price for a fair day's work? Isn't the money better off in your hands, than being in your client's accounts when it is not his?
Most people will be working 44 weeks a year, at 38 hours weekly. Which is 1,672 hours annually. And if each hour you lost $1, after tax, that is about $1,000 you've effectively said you won't take. Seems silly, when you take a longer view on things.
If I offered you $1,000 as a gift, wouldn't you take it?
Well that $1,000 actually isn't a gift. You literally earned it.
When you think about fixed pricing like that, it makes much more sense.
Would you ever have an initial meeting with your client and say something like: if you ever need me to subsidise your business or use me financially like a credit card, please feel free to do that. Of course not! And your client would probably be shocked if you spoke like that. But by not properly billing your clients, you are in effect letting them borrow money from you. Is that what you, or they, really want?
How we help you implement it into your business and to your clients
We understand that change isn't everyone's favourite thing. Most people like steady as she goes as a lifestyle. Even if you found yourself nodding in agreement with me over various points, it is a bit like throwing out all those old clothes that you never actually wear…. do I really have to do this? No, you don't. You can continue carrying on as you've always done. And you will most likely get the same results. So if the pain of change is more than the pain of staying the same, you will probably waver and not make the necessary changes. We get you! We are living, breathing people too!
That is why we will,
Many of our clients have had great success in implementing fixed pricing to their billing structure. Nearly all of them had great success. And if your client refuses to have fixed pricing implemented, that is okay too. You are left with a choice. Do you want to keep working with this client? If no, then it is time for you to go your separate ways – good! If yes, then you can still engage them under your old terms and conditions of an hourly rate. If you are happy with your hourly rate, continue with that. And if you think you are providing better value than you are being paid, you will need to renegotiate a higher rate.
Not all things in life are all or nothing. So sometimes a blend between different styles is going to be the best fit for you and your bookkeeping business.
That is our take on fixed pricing. Over to you…
Thank you for reading this post. I hope it was useful to you, and helped you to make up your own mind whether or not you want to remain on an hourly rate, or move over to fixed pricing.
If fixed pricing seems like a fit for your Bookkeeping Business, please consider getting in touch with us, and we will help you implement this pricing method that will help smooth out your billing, which helps both you and your clients, and can help stop you feeling bad for billing your client what they agreed to pay you in the first place.
Please get in touch. We look forwards to hearing from you.
Until then… Stay Savvy, Amy
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