A one-minute read for a quick insight into data-based pricing.
We challenged Beau Gaudron, the founder of cloud consulting firm Growthwise, to answer some complex questions about data-driven pricing, in only one minute.
1. What is data-based pricing?
Data-based pricing should be the driver of value pricing. Before onboarding any new client, you should invest time to find out what software they use, what their turnover is, and how they operate. This will help you define the type of client you’ll be dealing with and therefore the value you can add as an accountant and business advisor.
2. What’s the benefit and financial impact of using data-based pricing versus the other models?
Purely doing value-based pricing without some form of discovery quickly leads to out-of-scope work. Fixed or timesheet-based pricing has the pitfall of the client never knowing what to expect and also doesn’t encourage efficiencies in your own business.
Data-based pricing takes less time and is more accurate, as you are aware of what type of work you are approaching.
3. What kind of questions would you ask clients that will help determine your pricing?
Ask your clients very simple questions such as ‘Are your tax lodgements up-to-date?’, ‘What was last year’s turnover?’, ‘How many staff do you employ?’. Ask them to give you access to Xero, so you can connect it to Xavier to do a health check. Ask for access to Receipt Bank to see if they are regularly submitting paperwork.
4. How can accountants use Xavier, Receipt Bank or cash flow tools to determine their pricing?
Xavier can show you transaction-level data, the health of the accounting package, and flag any issues, collating it all in a pdf document which you can use to drive a pricing discussion with a new client. This also means you don’t have to to spend a huge amount of time wading through a Xero file to find out that information yourself. The Xavier dashboard alone can show turnover, unreconciled transactions, duplicate contacts, multi-coded contacts, and duplicate transactions.
You can use Receipt Bank by adding a client to your partner account, to review the client’s submission quantity and quality, i.e. how often they are sending documents and how much outstanding paperwork they have. This data can indicate not just the size of the client but the overall health of their accounting system.
Cash flow tools allow you to highlight to clients when they are going to need more support. This means you can advise them ahead of time that your fees will increase accordingly with their growth.
5. How do you introduce a new pricing model (and potentially a new, higher price) to clients?
Have a discussion with your clients about how much they have been paying and what for. Think whether you can craft a package that takes care of those needs for an ongoing known price. Your client will appreciate knowing the spend ahead of time. This will also force more efficiencies in your business.
6. What’s the easiest way to transition from time-based to data-based pricing?
Think about why you are doing time-based pricing in the first place. For most people it’s because they are afraid of losing billing. Instead, you should think how you can become more efficient and complete things in less time, so you can offer more value. The type of client you’re dealing with is key to your efficiency. This is why data-led pricing should inform value pricing.