{"id":24578,"date":"2021-12-27T08:00:53","date_gmt":"2021-12-27T14:00:53","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=24578"},"modified":"2023-08-22T11:08:12","modified_gmt":"2023-08-22T16:08:12","slug":"the-path-to-advisory-positioning-and-pricing-your-advisory-services","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/advisory-services\/the-path-to-advisory-positioning-and-pricing-your-advisory-services\/","title":{"rendered":"The Path to Advisory: Positioning and pricing your advisory services"},"content":{"rendered":"

Note:<\/strong> Many thanks to the Intuit\u00ae Tax Council for their guidance in putting together this article and for their input on “The Path to Advisory.” See editor’s note to download the guide.<\/em><\/p>\n

Businesses in many industries are shifting to value-based pricing and subscription models, and advisory services<\/a> are a natural fit for this transition. Almost all of our Tax Council members charge a flat recurring monthly fee for advisory services. They vary in their methods for determining pricing, but all of them have shifted away from time tracking and instead use value to determine fees.<\/p>\n

Jamie E. O’Kane says, \u201cWe have always been a tax planning first model and a recurring retainer first model. We don\u2019t do tax preparation only. The reason we moved to this model is better profitability for us, as well as delivering the services clients were expecting from their provider but were not getting. This works really well for us. We provide ROI through the planning.\u201d<\/p>\n

Alejandra Matias says, \u201cBundled services enable us to work closely with clients on a monthly basis, instead of an annual basis, so we get to know them better and can tailor more services around their needs.\u201d<\/p>\n

Before we look at the benefits of the different pricing models, let\u2019s take a moment to define them.<\/p>\n

Transactional pricing<\/strong> relies on defined hourly or service fees derived from the calculation of internal firm costs plus a standard markup.<\/p>\n

Value-based pricing<\/strong> leverages the rate firms believe their clients are willing to pay based on the associated value provided. Colin Horsford says, \u201cthe complexity of the situation and the engagement often influences the value and price.\u201d<\/p>\n

Subscription pricing is a common form of value-based pricing where the fees are divided into regularly timed increments across the timeline of the contracted engagement. Subscriptions also work best for recurring services like onboarding, training, accounting, payroll and bill pay.<\/p>\n

\"Pricing<\/p>\n

John Jordan says, “Transitioning clients from a transactional model to a value model\u00a0can be challenging. We capture what is most important to the client, which is tax savings, and bundle it with the other services into their monthly service package. We are selling peace of mind and ROI on our fees via tax savings. Clients appreciate that everything is included in the monthly fee, so they don\u2019t ever feel blindsided or nickel and dimed by hourly billings.<\/p>\n

Heather Satterley says, \u201cThere are lots of experts and programs to help advisors pricing and positioning services. Rootworks really helped me think differently about my value, which changed my life. Joe Woodard also has a good program to create tiers or packages of services that clients can choose from. Then when clients want things outside the limits of that tier, our team gives them the option to move up.\u201d<\/p>\n

Next, let\u2019s look at the detailed pros and cons for the firm, as well as the best applications for each of the pricing\/billing models.<\/p>\n

Pros and cons of hourly fees<\/h2>\n

A firm charges a set hourly rate for services based on the staff members involved in the required processes in this format.<\/p>\n

Colin says, \u201cwe try to price by project for valuations and consulting because clients like to know what the fee is, and we move to a subscription fee for recurring services once we understand the scope of work. We learned to put an end date on projects and clearly define scope, or clients may keep requesting changes. We switch to hourly additions at a date and that helps limit their changes.\u201d<\/p>\n

Pros<\/strong><\/p>\n