GETTING YOUR PRICING RIGHT
SAIPA often receives queries from members about how much they should charge clients for their services. This is one of the most important aspects of running a professional practice, yet it’s also one of the most challenging. Pricing is ultimately a personal decision and depends on several factors: the nature of your services, operational costs, market trends, and most importantly, the value you provide to your clients.
Setting the right price is about more than covering your costs—it’s about building trust and transparency with your clients. A clear, well-thought-out pricing structure shows respect for both your work and your clients’ needs. And when those foundations are strong, even difficult conversations about pricing adjustments become more approachable.
In this article, we’ll explore key factors that influence pricing, models to consider, and practical tips for communicating your fees effectively, all while maintaining professionalism and integrity.
Factors Influencing Pricing
Value of Services Offered
Your pricing should reflect the value of the services you provide. Routine bookkeeping might command lower fees than high-value offerings such as tax planning or strategic business advisory. The complexity of the work plays a significant role here—services that require specialised expertise or advanced problem-solving naturally warrant higher fees.
Moreover, your professional experience, certifications, and reputation also enhance the value you bring. Clients are often willing to pay more when they see your unique skills as a key part of their success.
Market Trends and Competitor Pricing
It’s always wise to know what others in your field charge. Conducting market research can give you a sense of prevailing rates and help you position yourself competitively. That said, don’t fall into the trap of under-pricing just to attract clients. Undervaluing your services can lead to burnout and may cause clients to undervalue the quality of your work. Instead, focus on what makes your services unique and how they meet your clients’ needs.
Client Demographics
Your pricing strategy should align with your target market. Small businesses, for example, might have different budgets and needs than larger corporations. Offering tiered pricing or service packages allows you to cater to a variety of clients without compromising on value. Tailoring your approach demonstrates flexibility while ensuring you remain sustainable.
Operational Costs
Running a professional practice comes with costs: office space, software, staff salaries, and more. These must all be factored into your pricing. Don’t forget to account for less tangible investments, like continuous professional development and compliance with regulations—all of which contribute to the quality of your services.
Time and Effort
Time is one of your most valuable resources, and it should be reflected in your pricing. Consider the hours required for recurring tasks and use time-tracking tools to ensure accuracy. Remember to build in buffers for unexpected client requests or revisions—they’re inevitable and should be accounted for in your fee structure.
Pricing Models to Consider
Hourly Rate
An hourly rate is a straightforward model that many practitioners use. Early in my career, I learned the 1:1:1 principle for setting rates: one-third salary cost, one-third overheads, and one-third profit. This framework is simple yet effective for calculating sustainable rates. However, it’s important to revisit these calculations regularly to ensure they still align with your business needs.
For example, if your hourly rate is R1,000 and a consultation takes two hours, your invoice would total R2,000. This model works well for ad hoc tasks but relies on accurate tracking of your time.
Fixed Fees
Clients often appreciate the predictability of fixed fees. For instance, you might charge R20,000 for preparing annual financial statements for a small business. Fixed fees work best for clearly defined tasks where the scope of work is predictable.
Value-Based Pricing
Value-based pricing focuses on the benefits your services bring to the client. For example, if your expertise streamlines a client’s operations, resulting in measurable cost savings or growth, your fee reflects that value. This model emphasises the practitioner’s contribution rather than focusing solely on hours worked, making it particularly effective for strategic or high-impact engagements.
Retainer Agreements
Retainer agreements provide stability for both you and your clients. For example, charging R5,000 per month for ongoing bookkeeping and compliance support ensures a steady income stream while offering your clients consistent access to your expertise.
Special Considerations: Contingency Fees
Contingency fees, where payment depends on achieving specific outcomes, can seem appealing but come with strict limitations for SAIPA members. For assurance engagements such as independent reviews, contingency fees are prohibited to maintain the practitioner’s independence. Similarly, SARS and SAIPA forbid charging contingency fees for completing income tax returns, as these can create incentives for aggressive or unethical practices.
Maintaining your independence and adhering to professional standards is non-negotiable. Fee structures that compromise these principles not only risk regulatory consequences but can also harm your reputation.
Tips for Setting and Communicating Your Prices
Pricing isn’t just about numbers; it’s about understanding your clients and showing them the value you bring. Here’s how to get it right:
- Tailor Your Proposals: Your proposals should address the client’s specific needs. While it’s important to highlight your expertise, focus on how your skills will solve their problems. Clients care more about what you can do for them than reading a long document about who you are.
- Be Transparent: Clearly outline the scope of services and associated costs. Transparency builds trust and helps clients understand what they’re paying for.
- Leverage Tools: Use software for creating professional proposals and invoices. These tools streamline your workflow and ensure your pricing is presented clearly.
- Speak Their Language: The way you frame your pricing matters. For instance, saying “annual pricing adjustment” instead of “fee increase” can make discussions about changes less intimidating.
- Review Regularly: Keep your pricing aligned with inflation, market trends, and your evolving expertise. An annual review ensures your fees remain competitive and fair.
- Charge for Consultations: Your time is valuable. Don’t shy away from charging for consultations—explain the value clients will gain during this time.
Common Pitfalls and How to Avoid Them
Under-pricing
Setting your fees too low might attract clients initially, but it can lead to financial strain, burnout, and even a perception that your services are of lower quality. Many practitioners fall into this trap when trying to establish themselves in a competitive market. To avoid under-pricing:
- Benchmark your rates against industry standards to ensure they are competitive but reflective of your expertise.
- Factor in not just direct costs like salaries and software, but also less obvious expenses such as training, professional development, and certifications.
- Value your time appropriately, including time spent on client communication, research, and follow-ups.
Overpricing Without Value
Charging high fees without demonstrating clear value can alienate potential clients. Clients are willing to pay for expertise, but they need to understand why your fees are worth it. To avoid this:
- Always articulate the tangible and intangible benefits your services provide, such as ensuring compliance, saving time, or providing strategic insights that improve profitability.
- Use testimonials or case studies to show how your expertise has helped other clients achieve their goals.
Lack of Consistency
Inconsistent pricing across clients or engagements can cause confusion and harm your credibility. This can happen when fees are set arbitrarily or adjusted too freely. To ensure consistency:
- Standardise pricing for common services, with clear guidelines for adjustments based on scope or complexity.
- Document your pricing policy and use it as a reference point for both you and your team.
Scope Creep
Scope creep occurs when additional tasks or responsibilities are added to a project without a corresponding adjustment to fees. It can erode profitability and strain client relationships if not managed effectively. To avoid scope creep:
- Clearly define the scope of work in your agreements, specifying what is included and excluded.
- When a client requests additional work, address it immediately with a revised quote or an addendum to the original agreement.
Failing to Communicate Value
Clients may hesitate to pay your fees if they don’t understand the value you bring to their business. This is particularly true in technical professions where the benefits may not be immediately obvious. To address this:
- Communicate the impact of your work in terms that resonate with the client. For example, instead of focusing on “filing VAT returns,” highlight how your work ensures compliance and reduces the risk of penalties.
- Regularly update clients on your progress and outcomes to reinforce the value you provide.
Overlooking Regular Adjustments
Failing to adjust your fees regularly can result in stagnant pricing that doesn’t account for inflation, rising costs, or your growing expertise. To avoid this:
- Schedule annual reviews of your pricing structure to ensure it aligns with market trends and operational realities.
- Frame any fee adjustments as “pricing updates” rather than “increases” to make the changes more acceptable to clients.
Conclusion
Getting your pricing right is about more than just covering costs or competing in the market—it’s about recognising and showcasing the true value of your work. Pricing should reflect the expertise, effort, and unique value you bring to your clients, ensuring both the sustainability of your practice and the satisfaction of those you serve.
SAIPA members have a responsibility to uphold the integrity of the profession while also valuing their skills appropriately. Charging your worth isn’t just about profitability; it’s about setting a standard that elevates the profession. Ensure your fees align with the quality and impact of your services, and don’t shy away from having open, transparent conversations with clients about your pricing.
Take time today to review your pricing strategy. Is it fair? Is it sustainable? Does it reflect your expertise and the value you provide? If not, make the necessary adjustments. Remember, your clients will respect and value you more when you respect and value yourself. SAIPA members, let this be your call to action: charge your worth and price your services appropriately. Together, let’s set the benchmark for professionalism and value in our industry. Your clients will value what you value first.