How Much Would a CPA Pay for a Kid’s Bike?
Today I want to talk to you today about how to price a bicycle.
Now you might be wondering, what has this got to do with being a CPA? What does the price of a bike have to do with payroll, cashflow, or tax strategy?
I’ll tell you what the connection is.
And I’m going to tell you through a recent experience I had buying a bike for my five-year-old daughter, Hazel.
It was an expensive, but worth it bike. Here are five ways I never thought to justify the price:
- Component parts: rubber, aluminum, plastic.
- Time for the machine to stamp out the bike.
- Margins of the bike company.
- Goal earnings of the bike company owner.
- Comparing to prices of other bikes.
Instead, I made the purchase based on the value to me. And that value is being able to watch my daughter have a blast in the pump track with her friends, to feel more confident riding, and to be able to keep up with the boys.
Check her out, getting the hang of the pump track! Here’s the YouTube link: https://youtu.be/6reW8zJivmM
The price of the bike had nothing to do with the cost.
How this connects back to CPAs: they price their services all wrong, all the time.
Here are five examples of how CPAs price their services incorrectly:
- Hourly. Not so much a price, but more an expression of your confidence.
- Breaking it down into its component parts like their time, staff time, court time, bookkeeping is this much, payroll is that much.
- Destination margins. Shooting for the industry average of 14.9% or above.
- Goal earnings. “I need to make $400K so I can cover my desired expenses.”
- Comparing. They say they are not the most expensive, nor the least expensive CPA in town.
Each of these is something that I’ve heard a CPA say, and sometimes it’s how my own clients can think about pricing when we’re starting out.
And I get the value of these ways of thinking about pricing. You have to start somewhere.
The problem is the amount of money that CPAs are leaving on the table when they use incorrect pricing strategies.
In none of these examples did we talk about value. Nowhere did we talk about the value to me, the buyer.
Value and price are not one and the same.
And the fundamental problem with pricing any other way than on value is the amount of money left on the table.
So how do you get from pricing your time to assessing the value of the outcomes you help create and putting a price on that instead? You start by listening more to your clients. You listen to what they really care about.
When you spend more time with your clients and listen to why it is they want what they want, you will be able to uncover untold value. And then you can start value pricing. And when you start value pricing, your income increases while your workload decreases. And that is how you work less and make more.
When your service is amazing and the value is priceless, there will be clients who are happy to pay you for it.
Are you interested in the PDF related to this episode? Simply email me with an obvious subject title like, “Please email me the PDF related to episode XXX” and I will happily email it to you.
Stop being all things to all people: How to narrow your niche the easy way
Thursday, September 24, 12pm ET
GIVE UP CALCULATING $ PER HOUR
Break free of this arbitrary metric: there is a better way
Thursday, October 22, 12pm ET