How to Establish Pricing as a Center of Excellence in Your Firm

A center of excellence is a team or department within a company that has deep knowledge and expertise in a specific area. It serves as a hub for best practices, research and development and a go-to resource for other departments within the organization.

For CPA firms, establishing pricing as a center of excellence is crucial for several reasons. Firstly, pricing is one of the most critical functions within any business. It directly affects profitability, revenue and the client experience. A pricing center of excellence can help your firm set prices that align with client expectations while maximizing profits.

Secondly, pricing is an area where many firms struggle to stay competitive. With so many factors influencing the market, from changing client behaviors to increased competition, it can be challenging to keep up with pricing trends and develop effective pricing strategies. A pricing center of excellence can help to address these challenges by conducting research and taking a data-driven approach to pricing decisions.

Thirdly, a pricing center of excellence can help firms to better manage risk. By establishing a standardized pricing process, firms can reduce the risk of pricing errors, resulting in lost revenue, client dissatisfaction and reputational harm.

How to establish pricing as a center of excellence in your firm

Pricing is a critical function within any business, and establishing pricing as a center of excellence can help you stay competitive in an ever-evolving landscape. Here are some ways to make pricing a center of excellence in your firm.

Make the switch to value-based pricing

One crucial step to establishing pricing as a center of excellence is to switch from traditional hourly billing to value-based pricing. Value-based pricing is a pricing strategy focusing on the value your service delivers to the client rather than the time and effort it took to complete the task.

There are several benefits of implementing value-based pricing. Firstly, it increases profitability. With hourly billing, you are limited by the number of hours you can bill in a day. However, with value-based pricing, you can charge what the client is willing to pay based on the unique value you provide. It allows you to capture more value for your work and significantly impact your bottom line.

Secondly, value-based pricing enhances client satisfaction. Traditional hourly billing can sometimes make the clients feel like they are paying for every minute spent and dissuade them from contacting you with questions because they’re worried they’ll be charged for every phone call or email. Value-based pricing instead focuses on the value of the result delivered, making the client feel like they are getting value for their money. This approach makes the client feel more invested in the outcome and establishes a better relationship with them.

Don’t let individuals use arbitrary pricing methods

Firms recognizing pricing as a center of excellence don’t let individuals use arbitrary pricing methods. Instead, there is a logic behind every pricing decision, a system for pricing services and a process for reviewing them.

Pricing is a skill set that’s honed and developed over time. Unfortunately, people don’t become pricing experts when they get the CPA letters after their name, so letting individual partners and managers make pricing decisions can prove detrimental to the overall success of the firm because it leads to inconsistencies in pricing, resulting in lost revenue and client dissatisfaction.

Instead, develop a system for pricing services to ensure every pricing decision is based on a standardized set of criteria. For instance, it could be based on the level of skills, expertise and experience required to execute the job, the expected time for the job completion and other value parameters like the client’s budget, expected output and market competition.

Centralize the pricing of your services

Often, when professionals price their services, they price themselves much lower than a colleague would because they bring emotional baggage to the decision-making process. Firms that see pricing as a center of excellence have a centralized pricing committee and various pricing models for different service offerings.

Your pricing committee should include experts who understand the firm’s service offerings, industry trends and client preferences. By working together, the pricing committee can develop pricing strategies that are effective and aligned with the firm’s objectives.

The pricing committee’s first step is to analyze the firm’s existing pricing structure. Then, based on this analysis, the pricing committee can develop pricing models tailored to the firm’s service offerings and client needs. Yes, this may mean price increases for some clients, but it ensures the clients you keep (and new clients you bring in) are ones that value your services and are willing to pay for them.

In addition to developing effective pricing models and ensuring consistent pricing decisions, the pricing committee can also monitor the effectiveness of pricing strategies over time. This includes tracking revenue generated from various pricing models and assessing customer retention levels. If the committee identifies any issues or concerns, they can take corrective action to improve the firm’s pricing strategy. Establishing pricing as a center of excellence is critical for firms looking to remain competitive and drive long-term success. By treating your firm’s pricing with the level of attention it deserves, you can set yourself apart from competitors and ensure you are well-positioned to succeed in an ever-evolving business landscape.

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Jon Hubbard is a shareholder and consultant with Boomer Consulting, Inc.