What if you reduced prices by 30%?

Hey 👋 - Brandon here.

Happy Saturday to 1,550 growth-minded accountants.

Here’s one growth tip for you and your firm.

Today’s issue takes less than 10 minutes to read.

Land bigger clients. Raise your prices. Enjoy better margins.

This is a commonly held belief on how to scale an accounting firm. Social media posts advocating for firms to raise their prices appear weekly.

It makes sense - building a service firm is hard. Owners get burned out and one lever they can easily pull is pricing. Raising prices sheds cost-conscious clients which focuses the firm’s attention on those willing to pay for the value they receive.

As the firm works more with value-friendly clients, they find themselves onboarding larger clients who are willing to pay even more for the value they receive.

This is a perfectly fine way to build an accounting firm.

But I want to challenge you to think a bit differently.

Because low pricing, low margin work, can result in BIG business too.

HR Block raked in $3.58 BILLION last year

HR block is laughing all the way to the bank.

I can imagine their executives thinking:

“Focus on the high price high margin work you silly accountants! Your margin is our opportunity.”

Hate them (and their quality) as much as you want but they have figured out how to build strong systems around marketing, sales, onboarding, hiring/firing, and fulfillment to service super cheap projects.

And with great margins:

It is estimated that the average store does $130,661 in revenue and runs at a 30% profit margin (link).

Admittedly, I have no way of verifying the truth of the above statement.

But HR Block has been around since 1955 and they focus on the low end of the tax preparation market. When it comes to business building, they are doing something right.

So the next time someone tells you to raise prices, I want you to consider the following:

If you weren’t doing the actual fulfillment, how would that change your views on pricing?

Raising prices often results from wanting to place a higher value on our own time, not the market’s willingness to pay.

At least initially.

Accounting firm owners are traditionally heavily involved in fulfillment of client work. And the only way to make more money is (1) work more hours; or (2) raise prices.

Who wants to work more hours?

But imagine if you did zero client work and focused 100% of your time and effort on building a strong platform for other professionals to succeed. You systematize everything from marketing, sales, onboarding, hiring/firing, and fulfillment.

Your views on pricing would probably change.

Would you be happy with a 30% margin?

How about 20%?

Or 10%?

Would you feel delighted or ashamed to run a $50M firm netting 10% per year growing 30% organically due to total domination thanks to your ability to fulfill work at rock bottom prices?

What if you owned 90-100% of said firm?

We have to recognize that the pricing conversation is tied closely to how much time we personally spend fulfilling client work.

It is the first step in getting strategic about pricing.

If you reduced prices by 30%, what does that mean for your TAM?

TAM = Total Addressable Market.

Look across your current service offerings and the prices associated with them.

If you cut prices by 30% across the board, how many more prospective clients would buy from you?

If the answer is “a shit load,” let’s explore this a bit more:

• What would you need to cut from scope to reduce prices 30% and maintain healthy profitability?

• What if you didn’t reduce the scope at all and still reduced prices 30%… what processes/systems do you need to improve to maintain healthy profitability?

Thinking through these questions may open doors for you that you were previously ignoring.

As Sam Walton, the founder of Wal-Mart, famously said:

“Your margin is my opportunity.”

Can you offer lower priced work to win clients and then “ascend” them up the value ladder over time?

If you can pair a low-priced service with your firm’s higher priced offerings, you have a recipe for total market domination.

Look at all of the firms you’d consider your peers:

If you can offer the same clients a much lower price, you will win many more clients.

And if you can keep those clients happy, over time they will “ascend” to your higher priced offerings.

The earlier in the client’s journey you can lock them in, the better business you will have.

What’s the risk… why wouldn’t this work?

In order to build a business on low prices, you have to be a top notch business owner.

Laser focused on systemization, strategy, and business model design.

Your cash flow would come from your ability to enjoy rapid organic growth.

Frankly, many firm owners are not ready for this.

The typical firm owner story: we started a firm because we hated working crazy hours for someone else. And we haphazardly grew our firm as the years went by. There was little strategy, and we are heavily involved in fulfillment.

I don’t think you can be successful with a low priced model/offer until you get out of the client work and dedicate yourself to winning the game of business.

And for full transparency - I haven’t gone this route. I think it’s hard to service multiple tiers of clients at once and I don’t want to divert my team’s focus.

But… one day I might.

That's all for this Saturday. See you next week.

Whenever you're ready, here's how I can help you.

→ Work with me 1:1 to grow your firm (now accepting waitlist coaching applications)

See you again next week.

Cheers,

Brandon

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