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The Secret to Scaling:
How to Build & Implement a
Fixed Fee Pricing Plan
Your Hosts
Tom Maxwell
Head of Customer Success
Practice Ignition
Yoseph West
Head of Marketing
Hubdoc
Poll: How many monthly
bookkeeping clients do you
have?
Today’s Agenda
● Introducing the cloud accounting / bookkeeping business model
● How to bundle recurring and nonrecurring services
● Determining a time / cost baseline of each service + pricing
● How to have the “value” conversation with clients
● How you can increase profitability with fixed fees
The Inspiration Behind this Webinar
Background:
● Self funded + bootstrapped by Guy Pearson (now non-exec chairman plus
founder and CEO of Practice Ignition)
● 100% cloud from day one
● Adopted a fixed fee billing model after studying startup software companies
Growth:
● 7 years old (2010 start date)
● From 1 employee to 20 by year 4
● From 1 to 3 offices by year 4
● From $0 to $2mm in annual recurring revenue in the first 5 years
● From only serving clients in Australia to serving clients in 8 countries
● Highlight includes helping clients raise $100m in funding
Niche:
● High growth companies
● High Net Worth Individuals
● 100% cloud businesses
What is the Cloud
Accounting / Bookkeeping
Business Model?
Key Components of a Cloud Business Model
Value Costs Invoicing / Payments
Ex. delivering outsourced
accounting
Ex. staff wages, rent,
internet, subscriptions
How frequently you
invoice / collect
payment
The Traditional Model: Compliance Services
Example
The Traditional Model: Bookkeeping
Services Example
Why Hourly & Cloud Software Don’t Work
The Cloud Model = Monthly Value
Moving Away from Hourly Billing is
Better for You and Your Clients
Fixed fee billing provides:
For Your Clients
● Better service for the same cost
● Confidence in their trusted
advisor (as recurring services
are delivered at a higher
standard)
For You
● Deliver a more efficient service
with higher profits
● More opportunities for
value-priced projects
● No longer concerned with time
for billing & efficiency is
prioritized
The Cloud Business Model with Fixed Fees
Value
Deliver value to your clients
on a monthly basis.
Costs
Try to align all your costs to a
monthly basis
Invoicing / Payments
Get paid upfront. Fixed fee
pricing is an exchange of risk.
Poll: How would you
describe your current
pricing model?
How to Bundle Monthly
Service Packages
What is a cohort analysis?
Cohort = A group whose members share one or
more similar characteristics
Cohort Analysis: The Easiest Place to Start
● Who are my monthly clients?
● Who are my quarterly clients ?
● Who are my annual clients?
Cohort Analysis
Break down the commonalities
What do you do for 90% of each cohort?
● The basics: financial statements, tax returns, etc.
● Additional variables delivered on a regular basis: sales tax, returns,
payroll, management meetings
● What software is used within each cohort?
Monthly Clients Quarterly Clients Annual Clients
Core Services ● Bookkeeping
● Training and support
● Update and deliver
training manuals
● Monthly debtor report
● Bookkeeping
● Sales Tax
● Quarterly Review
meetings
● Training and
support
● Annual accounts
● Tax returns
● Training and
support
Software to deliver
the core services
● QBO
● Hubdoc
● Dropbox
● QBO
● Hubdoc
● Tax software
● QBO
● Tax software
● Dropbox
● Hubdoc
Add-on services ● Payroll
● VCFO
● AP/AR
● T4/Group certs/W2
● Tax planning
● VCFO
● Software setup and
training.
● Business Advisory
● Risk Management
How Do You Align All Cohorts to a Monthly
Package?
● What additional services can be delivered to quarterly/annual clients?
or how do we get them to pay monthly?
● Billing frequency is separate to delivery frequency
Use the Cohort
to Calculate a
Baseline Price
Time (hrs) Rate (p/h) Role type
Admin 0.1 80 Admin
ASIC/SEC/Companies 0.1 80 Admin
Preparation of Financials 4 200 Senior
Review/Audit of financials 4 250 Partner
Preparation/lodgement of
Tax return
1.25 150 Intermediate
Accounting Support 2 80 Grad
Filing fee 1 350 Fixed 1
Accounting software 12 50 Fixed 2
Example Plan – Annual Compliance Package
Don’t Sweat the Small Stuff
Don’t worry about overages and underages on each and every client
The Law of Averages
Counter the over/unders by:
● Regularly reviewing your service bundles
● Develop a standard tech stack and workflow
● Constantly optimize your systems as your team gains experience while
charging the same / more
● Remove the outliers (but ensure you charge appropriately for them)
● Profits will increase per service in the long run
Time
(hrs)
Rate
(p/h)
Cost p.a. Monthly $ Time/Monthly Role type
Admin 0.1 80 8 Time 0.67 0.008333333333 Admin
ASIC/SEC/Companies 0.1 80 8 Time 0.67 0.008333333333 Admin
Preparation of Financials 4 200 800 Time 66.67 0.333333333 Senior
Review/Audit of financials 4 250 1000 Time 83.33 0.333333333 Partner
Preparation/lodgement of
Tax return
1.25 150 187.5 Time 15.63 0.1041666667 Intermediate
Accounting Support 2 80 160 Time 13.33 Grad
Filing fee 1 350 350 Fixed 29.17 Fixed 1
Accounting software 12 50 600 Fixed 50.00 Fixed 2
Total: $3113.5 $259.46
Marketable price $3330 $275
Example Plan – Annual Compliance Package
Considerations for Variables in Recurring Services
Bookkeeping and payroll are examples of services where variables dictate
the cost:
● Payroll pricing determined by number of employees
● Bookkeeping pricing determined by number of transactions
Considerations for Variables in Recurring Services
● Consider a tiered approach to packaging your services
○ Payroll: monthly payroll for up to 10 employees per month.
○ Bookkeeping: Reconciling up to 150 transactions per month
● How you arrive at these numbers is determined by the type of clients
you service.
● Once you’ve determined the tier “ceiling”, ensure you also price out
add-ons for transaction/employee count overages.
Seachange Accountants and Advisors:
Cost + Margin to
Scale Service Bundles
Review Cost and Margin as You Grow
July August September October November
Product Cost $79.17 $79.17 $79.17 $79.17 $79.17
Time Cost $180.29 $180.29 $180.29 $165 $165
Number of Clients 100 105 110 121 142
Growth Rate 5% 5% 5% 5%
Price $275 $275 $275 $275 $275
Revenue $27,500 $28,875 $30,250 $33,275 $39,050
Total Cost $25,946 $27,243 $28,540 $29,545 $34,672
Margin 5.65% 5.65% 5.65% 11.21% 11.21%
Review Cost and Margin as You Grow
● Make sure you’re focusing on efficiency here:
○ As you add more clients your costs decrease
○ As you improve your processes your time cost comes down
● Review costs regularly
● Change prices annually
● Add additional value when you increase your fees
The Role of Value
Pricing
The “Hug” Rule
Have you ever been hugged by a client for
completing compliance work? Chances are slim.
● Clients (typically) don’t see value in
compliance work – it’s just something they
have to do as a business owner
● Compliance work is your opportunity to
Build trust and over-deliver
(apps will help you do this)
● If you do this, the opportunity for high
value project work is tremendous
The “Hug” Rule
● Value pricing is ideal for project work that arises from the amazing work
you do when delivering your fixed fee recurring services
● In this case, project work refers to any service (typically, non-recurring)
that can lead to a positive change in the direction of your clients’
business – i.e. the types of services you deserve a hug for!
How to Have the
Value Conversation
Communicating Before the Change
Announce in advance
Send a client email 90 days in advance explaining
why you are changing your pricing model
Some examples:
● Allows the firm and your business to go to the cloud and move towards
real-time financials
● Maintains a profitable and cash-flow positive relationship (we can
continue to be your advisor)
● No surprise bills, ever
Keep Communicating While You’re
Determining Prices
Share your plans and work together with your client
to figure out which one makes sense to them
● Part of the move to fixed fees is being transparent and openly sharing
pricing
● You will reduce fees for some clients
(Remember: don’t sweat the small stuff as you shift your focus to scale
and efficiency)
● Ask them if they have any queries
Communication After the Transition
● Get your fees approved in writing with an engagement letter
● Set regular reviews with your client (for upsell opportunities and to
minimize scope creep)
● Re-engage annually with a new engagement letter
Scaling Up + Becoming
More Profitable
The key metric is MRR (Monthly Recurring Revenue).
Traditional Growth Model
● No incentive to grow (as your costs grow with you)
● No incentive to become more efficient
● Profit margin is typically static
Traditional Growth Model
Existing
client’s new
business
Lost client
Referral
Tax season
MRR Growth Model
● Incentive to grow (as your costs will eventually plateau)
● Huge incentive to become more efficient
● Profit margin can grow
MRR Growth Model
Projects should
fund your
growth activities
Profit (40%
can be
achieved)
MRR Growth
As you streamline, you focus on efficiency and driving
cost of doing the every day down, constantly boosting
profits over time.
Poll: What accounting
software do you support?
Your Three Takeaways
1. Align the three components of the cloud business model
(Value/Costs/Invoicing & Payments) by focusing on monthly delivery.
2. Don’t sweat the small stuff and just get started.
3. Constantly review your prices, your processes and your tech stack.
Remember: we are here to help!
VIP Account for You
One free Hubdoc account for
Accountants & Bookkeepers
Simply sign up at
HTTPS://APP.HUBDOC.COM/SIGNUP
Once you love Hubdoc, begin
adding your clients
Supercharge your practice!
Getting Started on PI
Two offers:
1. Sign up for an annual plan and your first $30k in
processed payments is on us*
2. 50% off PI Launch (Optional implementation and
custom training plan)
To claim these offers, Please book a demo with a
Territory Manager here: http://calendly.com/pi-launch
*Credit card payment processing available in Canada, NZ, and the UK. Credit Card and
Direct Debit available in Australia and the USA. A credit is applied to your account
towards your payment fees
Thank You + Q&A

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The Secret to Scaling: How to Build & Implement a Fixed Fee Pricing Plan

  • 1. The Secret to Scaling: How to Build & Implement a Fixed Fee Pricing Plan
  • 2. Your Hosts Tom Maxwell Head of Customer Success Practice Ignition Yoseph West Head of Marketing Hubdoc
  • 3. Poll: How many monthly bookkeeping clients do you have?
  • 4. Today’s Agenda ● Introducing the cloud accounting / bookkeeping business model ● How to bundle recurring and nonrecurring services ● Determining a time / cost baseline of each service + pricing ● How to have the “value” conversation with clients ● How you can increase profitability with fixed fees
  • 5. The Inspiration Behind this Webinar Background: ● Self funded + bootstrapped by Guy Pearson (now non-exec chairman plus founder and CEO of Practice Ignition) ● 100% cloud from day one ● Adopted a fixed fee billing model after studying startup software companies Growth: ● 7 years old (2010 start date) ● From 1 employee to 20 by year 4 ● From 1 to 3 offices by year 4 ● From $0 to $2mm in annual recurring revenue in the first 5 years ● From only serving clients in Australia to serving clients in 8 countries ● Highlight includes helping clients raise $100m in funding Niche: ● High growth companies ● High Net Worth Individuals ● 100% cloud businesses
  • 6. What is the Cloud Accounting / Bookkeeping Business Model?
  • 7. Key Components of a Cloud Business Model Value Costs Invoicing / Payments Ex. delivering outsourced accounting Ex. staff wages, rent, internet, subscriptions How frequently you invoice / collect payment
  • 8. The Traditional Model: Compliance Services Example
  • 9. The Traditional Model: Bookkeeping Services Example
  • 10. Why Hourly & Cloud Software Don’t Work
  • 11. The Cloud Model = Monthly Value
  • 12. Moving Away from Hourly Billing is Better for You and Your Clients Fixed fee billing provides: For Your Clients ● Better service for the same cost ● Confidence in their trusted advisor (as recurring services are delivered at a higher standard) For You ● Deliver a more efficient service with higher profits ● More opportunities for value-priced projects ● No longer concerned with time for billing & efficiency is prioritized
  • 13. The Cloud Business Model with Fixed Fees Value Deliver value to your clients on a monthly basis. Costs Try to align all your costs to a monthly basis Invoicing / Payments Get paid upfront. Fixed fee pricing is an exchange of risk.
  • 14. Poll: How would you describe your current pricing model?
  • 15. How to Bundle Monthly Service Packages
  • 16. What is a cohort analysis? Cohort = A group whose members share one or more similar characteristics
  • 17. Cohort Analysis: The Easiest Place to Start ● Who are my monthly clients? ● Who are my quarterly clients ? ● Who are my annual clients?
  • 18. Cohort Analysis Break down the commonalities What do you do for 90% of each cohort? ● The basics: financial statements, tax returns, etc. ● Additional variables delivered on a regular basis: sales tax, returns, payroll, management meetings ● What software is used within each cohort?
  • 19. Monthly Clients Quarterly Clients Annual Clients Core Services ● Bookkeeping ● Training and support ● Update and deliver training manuals ● Monthly debtor report ● Bookkeeping ● Sales Tax ● Quarterly Review meetings ● Training and support ● Annual accounts ● Tax returns ● Training and support Software to deliver the core services ● QBO ● Hubdoc ● Dropbox ● QBO ● Hubdoc ● Tax software ● QBO ● Tax software ● Dropbox ● Hubdoc Add-on services ● Payroll ● VCFO ● AP/AR ● T4/Group certs/W2 ● Tax planning ● VCFO ● Software setup and training. ● Business Advisory ● Risk Management
  • 20. How Do You Align All Cohorts to a Monthly Package? ● What additional services can be delivered to quarterly/annual clients? or how do we get them to pay monthly? ● Billing frequency is separate to delivery frequency
  • 21. Use the Cohort to Calculate a Baseline Price
  • 22. Time (hrs) Rate (p/h) Role type Admin 0.1 80 Admin ASIC/SEC/Companies 0.1 80 Admin Preparation of Financials 4 200 Senior Review/Audit of financials 4 250 Partner Preparation/lodgement of Tax return 1.25 150 Intermediate Accounting Support 2 80 Grad Filing fee 1 350 Fixed 1 Accounting software 12 50 Fixed 2 Example Plan – Annual Compliance Package
  • 23. Don’t Sweat the Small Stuff Don’t worry about overages and underages on each and every client
  • 24. The Law of Averages Counter the over/unders by: ● Regularly reviewing your service bundles ● Develop a standard tech stack and workflow ● Constantly optimize your systems as your team gains experience while charging the same / more ● Remove the outliers (but ensure you charge appropriately for them) ● Profits will increase per service in the long run
  • 25. Time (hrs) Rate (p/h) Cost p.a. Monthly $ Time/Monthly Role type Admin 0.1 80 8 Time 0.67 0.008333333333 Admin ASIC/SEC/Companies 0.1 80 8 Time 0.67 0.008333333333 Admin Preparation of Financials 4 200 800 Time 66.67 0.333333333 Senior Review/Audit of financials 4 250 1000 Time 83.33 0.333333333 Partner Preparation/lodgement of Tax return 1.25 150 187.5 Time 15.63 0.1041666667 Intermediate Accounting Support 2 80 160 Time 13.33 Grad Filing fee 1 350 350 Fixed 29.17 Fixed 1 Accounting software 12 50 600 Fixed 50.00 Fixed 2 Total: $3113.5 $259.46 Marketable price $3330 $275 Example Plan – Annual Compliance Package
  • 26. Considerations for Variables in Recurring Services Bookkeeping and payroll are examples of services where variables dictate the cost: ● Payroll pricing determined by number of employees ● Bookkeeping pricing determined by number of transactions
  • 27. Considerations for Variables in Recurring Services ● Consider a tiered approach to packaging your services ○ Payroll: monthly payroll for up to 10 employees per month. ○ Bookkeeping: Reconciling up to 150 transactions per month ● How you arrive at these numbers is determined by the type of clients you service. ● Once you’ve determined the tier “ceiling”, ensure you also price out add-ons for transaction/employee count overages.
  • 29. Cost + Margin to Scale Service Bundles
  • 30. Review Cost and Margin as You Grow July August September October November Product Cost $79.17 $79.17 $79.17 $79.17 $79.17 Time Cost $180.29 $180.29 $180.29 $165 $165 Number of Clients 100 105 110 121 142 Growth Rate 5% 5% 5% 5% Price $275 $275 $275 $275 $275 Revenue $27,500 $28,875 $30,250 $33,275 $39,050 Total Cost $25,946 $27,243 $28,540 $29,545 $34,672 Margin 5.65% 5.65% 5.65% 11.21% 11.21%
  • 31. Review Cost and Margin as You Grow ● Make sure you’re focusing on efficiency here: ○ As you add more clients your costs decrease ○ As you improve your processes your time cost comes down ● Review costs regularly ● Change prices annually ● Add additional value when you increase your fees
  • 32. The Role of Value Pricing
  • 33. The “Hug” Rule Have you ever been hugged by a client for completing compliance work? Chances are slim. ● Clients (typically) don’t see value in compliance work – it’s just something they have to do as a business owner ● Compliance work is your opportunity to Build trust and over-deliver (apps will help you do this) ● If you do this, the opportunity for high value project work is tremendous
  • 34. The “Hug” Rule ● Value pricing is ideal for project work that arises from the amazing work you do when delivering your fixed fee recurring services ● In this case, project work refers to any service (typically, non-recurring) that can lead to a positive change in the direction of your clients’ business – i.e. the types of services you deserve a hug for!
  • 35. How to Have the Value Conversation
  • 36. Communicating Before the Change Announce in advance Send a client email 90 days in advance explaining why you are changing your pricing model Some examples: ● Allows the firm and your business to go to the cloud and move towards real-time financials ● Maintains a profitable and cash-flow positive relationship (we can continue to be your advisor) ● No surprise bills, ever
  • 37. Keep Communicating While You’re Determining Prices Share your plans and work together with your client to figure out which one makes sense to them ● Part of the move to fixed fees is being transparent and openly sharing pricing ● You will reduce fees for some clients (Remember: don’t sweat the small stuff as you shift your focus to scale and efficiency) ● Ask them if they have any queries
  • 38. Communication After the Transition ● Get your fees approved in writing with an engagement letter ● Set regular reviews with your client (for upsell opportunities and to minimize scope creep) ● Re-engage annually with a new engagement letter
  • 39. Scaling Up + Becoming More Profitable
  • 40. The key metric is MRR (Monthly Recurring Revenue).
  • 41. Traditional Growth Model ● No incentive to grow (as your costs grow with you) ● No incentive to become more efficient ● Profit margin is typically static
  • 42. Traditional Growth Model Existing client’s new business Lost client Referral Tax season
  • 43. MRR Growth Model ● Incentive to grow (as your costs will eventually plateau) ● Huge incentive to become more efficient ● Profit margin can grow
  • 44. MRR Growth Model Projects should fund your growth activities Profit (40% can be achieved)
  • 45. MRR Growth As you streamline, you focus on efficiency and driving cost of doing the every day down, constantly boosting profits over time.
  • 47. Your Three Takeaways 1. Align the three components of the cloud business model (Value/Costs/Invoicing & Payments) by focusing on monthly delivery. 2. Don’t sweat the small stuff and just get started. 3. Constantly review your prices, your processes and your tech stack. Remember: we are here to help!
  • 48. VIP Account for You One free Hubdoc account for Accountants & Bookkeepers Simply sign up at HTTPS://APP.HUBDOC.COM/SIGNUP Once you love Hubdoc, begin adding your clients Supercharge your practice!
  • 49. Getting Started on PI Two offers: 1. Sign up for an annual plan and your first $30k in processed payments is on us* 2. 50% off PI Launch (Optional implementation and custom training plan) To claim these offers, Please book a demo with a Territory Manager here: http://calendly.com/pi-launch *Credit card payment processing available in Canada, NZ, and the UK. Credit Card and Direct Debit available in Australia and the USA. A credit is applied to your account towards your payment fees
  • 50. Thank You + Q&A