The Wize Way

Episode 183: The Four Step Pricing Playbook for Accounting Firms

• Wize Mentoring for Accountants and Bookkeepers • Season 2 • Episode 183

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Most firm owners think pricing is a “numbers problem”… so they copy what the last accountant charged, slap on a fixed fee, and hope it works out.

The result? Scope creep, shrinking margins, and a team that’s flat-out busy while the profit quietly disappears.

In this episode of The Wize Way Podcast, Bren Ward sits down with Jamie Johns to break down the Wize approach to pricing, including:

✅ Why COGS % is the KPI that decides whether you live or die
 ✅ The real truth about value pricing vs fixed fees vs time billing (all can work, if you do it right)
 ✅ The 4-step pricing playbook to price jobs with confidence
 ✅ Why timesheets aren’t “dead” - they’re your efficiency and accountability dashboard
 ✅ How to increase fees without shocking clients (and why annual rises matter)

If you want pricing that protects profit, sets expectations, and scales with your team, this conversation is a must-listen.

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PS: Whenever you’re ready… here are the fastest 4 ways we can help you fix and grow your accounting firm:

1. Download our famous Wize Freedom Strategy Map for FREE - Find out the 96 projects every firm owner must implement to build a $5M+ firm that can run without them - Download here

2. Need to Hire right now? Book a 1:1 FREE discovery call with our WizeTalent hiring coaches to help find your next team member the Wize Way – Click Here

3. Book a 1:1 Wize Discovery Session – Spend 30mins with our Wize CEO, Jamie Johns, a $7M firm owner who is ready to give you his entire business plan to build a firm that can run without you – Find out more here

4. Work with Jamie and our mentors for 8 weeks - Build a custom business plan for your firm - Apply here

SPEAKER_00:

Welcome to The Wise Way, the show for accounting and bookkeeping firm owners who want more time, profit, and freedom. And a business that can run without them. I'm Brent Ward, your host, and each week we deep dive into the real stories, proven strategies, and battle-tested tools from successful firm owners just like you. Our wise mentors want to share their journey of how they've scaled and systemized their way to freedom so you can too. If you're stuck in the grind or you're ready to scale smarter, this is your blueprint. Let's get into the episode. And before we go into a bit more of the tactical stuff, I wouldn't mind just going up a few layers. Because there's a lot of noise in the market. Because it's such a big topic, it's quite an easy subject for people to create content on. There's a lot of noise in the market on it. And from our conversations over the last year or so, um one of the biggest epidemics in the industry is fixed pricing. Because profitability is just a massive issue, and scope creep, and you know, all the stuff that comes off not having your house in order when it comes to fixed pricing. So wouldn't mind touching on that. But if you go to the big the big topic of pricing and how we bought boil it down to the wise way of approaching it, where do we start?

SPEAKER_01:

Where do you start? Yeah, you start with your costs. Yeah, well, the the most important KPI you've got in your business, and arguably in any business, is the cost of goods sold percentage. So uh, you know, and the reason is is because the leverage factor of the cost of goods. So, you know, and inversely your margin, you know, your margin in what you're selling is the most important figure in your business. Um, you know, because if you've got no margin, then um you're dead in the water.

SPEAKER_00:

Yeah. So where do most firm owners, because most firm owners would be in this bucket, there'd be a very small percentage of firm owners that actually have pricing right, if there's even such a thing, but uh, where do they go wrong?

SPEAKER_01:

Um where do they go wrong? Well they they go wrong because they don't know how to price.

SPEAKER_00:

Yeah.

SPEAKER_01:

So you in essence, you've got to know, you've just got to know how to price. And a lot of the a lot of the time, um, they'll just do what the previous accounts done. Yeah. Uh, which is the wrong way.

SPEAKER_00:

So before we get into the actual your formula or methodology on how to price, can we talk a little bit about, you know, that for you you and I have known for the last 20 years, there's there's this debate around value pricing versus fixed pricing versus upfront pricing. Can you kind of distill from your experience, distill some of the or demyth some of this stuff? So let's start with value pricing. What's your take on value pricing?

SPEAKER_01:

Well, maybe maybe we step step one step back from that. Yeah. So here's here's the concept, right? It doesn't matter what you do, it's how you do it. So in that in that sense, you can value price, you can fix price, um, or you can time bill. So all three can be successful depending on how you do it. So that's what I would say.

SPEAKER_00:

Yeah.

SPEAKER_01:

Um with value pricing, with value pricing, I'm a fan of it in the sense that you've got to be able to articulate your value. Most accountants cannot articulate the value, which is which is a sales process. So you've got to believe in yourself, have the confidence that the price that you're putting on something is is worth it. Now, value value pricing to the extreme is um where you can price something like in an extraordinary amount um based on the success of tax A, for example. So there's a lot of arguments to and you know, for and against uh that particular type of value pricing. I'm not so much in favour of that, I'm more in favor of someone having the ability to articulate their value around, you know, a a fair price um that meets your KPIs. So, you know, that that being um that your cost of goods sold are 40% and your gross profits 60%. So yeah. And then the next one is fixed fees, of course. Fixed fees are fantastic, but um you've got to be so careful with scope, creeping uh and see that you don't drop profitability. Most firms um that fix fee lose profitability because they start doing more work than they quoted. Um and then you've got the old model as well, which is uh whip billing. And that's you know, I don't have a problem with that either. As long as you give your clients an estimate or you can manage the clients' expectations. So, in essence, you know, the way to grow a firm is to keep the clients you got and get more. How do you do that? Is you manage your clients' expectations. So if you can manage your client's expectations and value pricing or fixed fees or time billing, that's fine. If you can manage your client's expectations, you'll never lose a client.

SPEAKER_00:

So there's an argument that um for most firms, they haven't increased their price for a long time, typically. And some of the advice that we hear, certainly in the coaching space, is one of the first things you should do is just go to your client base and increase all your prices by whatever 20%, 50% in some cases. Um, as a blanket sort of project. And the argument is okay, some clients will leave, but there probably are the clients that you want to leave anyway. And with the increase in price, your your work's actually going to decrease because if clients leave, you've got less clients to manage, but you've still got extra revenue. So that's I'm not saying that's the right thing, but that's the rhetoric, that's the noise in the market. What are your thoughts or opinions or experiences?

SPEAKER_01:

Yeah, I'd say from my experience, most accounts are too cheap. Yeah, too cheap for sure. And even if you had 10% of your clients leave, the additional capacity that it creates for more profitable clients. So you don't want prop, you just you don't want clients that you don't make uh money on. But what you want clients, you want less clients that you make um profit on. So yes, uh always increase your prices, but you should do it every year. Where you see firms go wrong is where they haven't increased their prices for three or four years, and then all of a sudden they want to jump them up towards the new market value, and then the clients get a shock and they leave. So it's it's almost like when you what's that?

SPEAKER_00:

It's the delivery part of that as well, because but that's where we see a lot of the hesitation in that project. Yes.

SPEAKER_01:

And even when you buy a firm, you know, like a lot of a lot of people buy firms and they might that firm might have cheap prices, which often happens with sole traders. Um, but you can't go and change the prices the first year. You you have to stage the price increase over three years. Once you've won the client's trust, you can normally increase the prices, a bit like the book Speed of Trust by Stephen Covey. So um, yeah, you can't you've got to you can't increase your prices straight away. You normally have to do it over two or three years.

SPEAKER_00:

So let's go to uh approach to pricing and developing almost like a mini playbook for how you should approach pricing going forward. So um I don't know if you want to share your screen and yeah, well the first the first approach to pricing is to um it's probably th probably four steps.

SPEAKER_01:

So the first step at a high level is um work out um the type of work that you have to do for the client. So work out the type of work or the type of service the client wants. Um and obviously you've got to put that forward. Um the second step then is to work out uh in your team or in your business, in the firm, who you know, who's gonna do that work. So that's the second one, who's gonna do the work? The third step is out of the people who who are gonna do the work, how much time are they gonna spend on that work? Right. And then the fourth step is almost like a given is that you know the cost, and I stress the cost, you know the cost of the time that each of those individuals is gonna spend on that work. So once you've worked out what that cost is in total, obviously then you can add your margin to it. And then if you add your margin to it, right, if you add your margin to it, then you know what the what the fee is. And that's that's the perfect way to price.

SPEAKER_00:

So the perfect way to price is predicated on measuring time, right? And again, that to the next big thing in the market at the moment and has been for the last however many years is kill time sheets. So let's touch on that because it'd be wrong not to touch on that. It's a huge piece of the formula.

SPEAKER_01:

Um Yeah, it's it's just so important that you track time because if you track time, you can track efficiency. If you if you track time, you can track accountability. If you track time, you can track uh weaknesses that then lead to more training, to professional development. So tracking time has so many uh implications, and you know, even though it might be sexy, um, it's still the best way to be able to um, you know, manage your accounting firm from from bottom up, as Ed Chan says.

SPEAKER_00:

You know, and not not to go too far down the rabbit hole on this one, but what are the what are the guys who are preaching from the the rooftops of you know timesheets are dead and they're an old way of doing doing um business and like they have no place in the market. What are they missing? Like what are they actually missing that's so obvious for us at WISE in terms of the importance of tracking time?

SPEAKER_01:

Uh they're just missing the efficiency piece. And the the reason that this whole no time sheet type scenario came in is have a guess why? Fix fees. Yeah, right? Because tr traditionally, the only way to get a fee amount to build a client was uh was you know, you did your time sheets and then you raised the bill. Right? So, and then you know, people logically then went, hang on, if I know what the fee is, why do I, you know, why do I have to track the time? I don't need to track the time because I already know what the fee is. Right? Yeah. But what they forgot was is it's about efficiency. So obviously when you, you know, when you value price, often you're not even looking at uh the way that they value price, they're not even looking at how much time it takes, right? Because they say that you're caught in the time for money trap. Because when you value price, you're just determining a predetermined value based on what you think um you know the value of that service or the value of that win almost is to that client. It's nothing to do with time in in a lot of cases.

SPEAKER_00:

Yeah.

SPEAKER_01:

So the logic rapidly went down the you know that path that, you know, well, if I value price and then if I fix fee, I don't need to do your time sheet. Right. And and that's that's where it went wrong.

SPEAKER_00:

Instead of the most important number, which is the profitability number.

SPEAKER_01:

That was what I went as I said at the start of the conversation, all the attention went to the top line when it should have gone to the profitability number. And the profitability, the cost of goods sold number is determined by how much time people spend on jobs. Exactly. But it's good to analyze why this whole argument came down to no timesheets because of value pricing and fixed fees, right?

SPEAKER_00:

I just find it fascinating because it's such a fiercely argued point by some people at the moment. It's like almost um what's the word? Um fanatical. Yeah, it's like fanatical, yeah, and do and it divides, it's divisive. It's almost like you have to be in the no timesheet getting up by the timesheet.

SPEAKER_01:

Well, Marty, some staff have have will quit firms because they don't want to do a timesheet and they'll go and work for a firm um that doesn't do time sheets. Right. But what happens is when you have, say, about less often when you have less than seven people and you have this concept of management by walking around, right? Often you can manage a team of seven or less by brute force. In other words, you're in the office, you're seeing what people are working on, um, and via brute force and surveillance, you can manage people, right? And obviously, you know, 95% of firms don't turn over more than a million dollars. 95% of firms don't have more than seven people, right? So if you want to grow and scale, you want to you don't want to have top-down management like being in the office every day, like walking around seeing what people are doing. You want to have bottom-up management and timesheets is just the way to do it. Um, it it just gives you the data. So if you fix fee or if you value price, you know, you should always best practice is say, well, you know, I allocate 10 hours to do this job. There's 10 hours to do this job. But if but if that job takes 30 hours, right, and and you're scaling above, you know, the 95% that you don't want to be, how are you gonna manage that when you've got six teams like me?

SPEAKER_00:

Yeah.

SPEAKER_01:

Impossible. You can't manage it, right?

SPEAKER_00:

You've lost it, you've lost the plot.

SPEAKER_01:

Yeah.

SPEAKER_00:

So and then you're sitting there scratching your head as to why you're you're not making money. Yeah.

SPEAKER_01:

Yeah. Yeah. Because I don't know the clients, right? I can't even look up how long we've allocated that job and how long do we actually spend on it.

unknown:

Yeah.

SPEAKER_01:

Right. And that's why I love that's why I love the um that's why I absolutely love and f uh fanatical about this little calculator.

SPEAKER_00:

Yeah, so walk us through uh step by step.

SPEAKER_01:

Yeah. So step by step is we're gonna do we're gonna do a job. We're gonna do um.

SPEAKER_00:

Can you just tell us, sorry, John Z, just one step before you start that. Why do we have to develop this?

SPEAKER_01:

Why do we develop it? Yeah. Yeah. Because because firm owners don't firm owners and senior client managers don't know how to price jobs. That's why.

SPEAKER_00:

And it doesn't exist in any other software. If you can find it, let me know.

SPEAKER_01:

Perfect. So here I'm gonna put here, right? I'm just gonna put Bryn's uh I'm gonna put Bren's financial statements, right? You know, this is compliance at its call.

SPEAKER_00:

Yep.

SPEAKER_01:

So we'll put Bryn's financial statements in there, right? And so remember, like I said earlier, there's like those four steps in the playbook. So first of all, determine the service that you want to provide the client. Secondly, determine determine who's gonna, you know, who's gonna do the work. Right? So Ann Hathaway, she's a senior client manager, Ann. Yep. So we add we add her in there in there, and you can see Anne there, right? So we know what Ann's charge out rate is. Yep. Right? So charge setting a charge out rate is another topic for another day, but there needs to be some strategic thought around what that charge out rate is, and that's based on the person's salary, that's based on the market value of the of that person with that experience, with that skill that they bring to the marketplace.

unknown:

Right.

SPEAKER_01:

So the charge out rate's a discussion, and then the next question, as I said earlier, it's like step three. Well, how much time, how much time is Anne, who is a senior client manager, going to spend on this job? Right. So arguably she just does that final sweep, that final review. So it might only be say three hours on a substantial job. So as soon as you put the three hours in, we know what the fee is. Now, what I love about this calculator is it tells us the cost per hour of Anne. Yeah. It tells us the gross, it tells us the gross profit and the percentage. And what the beautiful thing is, right, we can say, hang on, well, this is a set of financial statements. So we're gonna get our senior accountant, Jennifer Anston, to spend most of her time doing this as a budget, right? We're planning. Quad two, not urgent important. Most people don't plan, it's quad two. So what I love about this is you can go in on the time of the job and you say, look, I think Jen is probably um, you know, when you're a senior client manager or a firm owner, when you scope out, this is where you do your scoping. You know, you you look at the job and you say, look, that's gonna take her 12 hours to do that because I've looked at the zero file, I've looked at all the uh situation, the entities and the structure of the client, right? And it's gonna take Jen that 12 hours to do that, right? So then we've got Jen's charge out rate, we've got the time, we've got the fee, uh, cost per hour, total cost, gross profit, and arguably the lower level stuff often have a higher GP in the ideal wise team, which is fantastic. Now, here you can see here, if we price this job at$151,530 and we actually do it in that time, right, we're gonna make a 74% gross profit. Guess what our KPI is? 60. We're in the zone, right? Right? You're in the zone. And arguably, right, say that you take a bit longer, right? You're still gonna recover it, but just say this is a fixed fee. So say you have to write some of that off. You can probably afford to write some of it off because the GP is 74. And if you did write some time off, you could probably arguably still come in at 60%. So the goal should always be the most advanced, highest level work possible done by the least experienced and expensive, uh, inexpensive person. That's that's the that's the wise ideal team. That's why it's always important to invest in those junior staff and keep stretching them, keep expanding them.

SPEAKER_00:

So just as a side uh question there, because it seems to be popping up a little bit recently, especially with our northern hemisphere clients, is uh, you know, we can't find staff that are experienced and have the skills across tax and bookkeeping, and so we have to silo our teams. Like the what's your what's your answer to that? What's the antidote to that? Because you know, the ideal team works for seven teams for you and hundreds of teams around the world. So what the guys who are coming back saying, no, we have to have silo teams.

SPEAKER_01:

No, that's just Britain, that is simply limited thinking.

unknown:

Yeah.

SPEAKER_01:

Right? Limited thinking. Because have a guess what? Most of those accounting firm owners, right, they know accounting. Right? They're the owner of the firm. They know accounting and they know tax. And to say that that to say that you can't train or you can't teach other people what you know, that's just a limiting, a limiting belief. Right? If you think like that, that's what you're gonna get. I think the opposite. Everything that I know, I wholeheartedly, authentically believe that I can teach someone else what I know. Right? That's that's a belief. But what you think is what you'll get. Right? Like, look look at you and I. We we're both human beings. Yeah. I don't care whether you're from India, Vietnam, or wherever you are, it might be harder or easier for some. Right. But part of your hiring process is hire the right people with the right DNA, with the right potential to do that role. But a lot of these firms, you know, um, they will say that people can't fulfill their full potential. People can't, you know, they'll say people can't do bookkeeping, or they uh traditionally what I read the other day was they can't do accounting and they can't do tax. Right. But here in Australia, that's like so different in our thinking, because the bookkeeping, right, and the accounting is the absolute fundamental and foundation to a set of financial statements. And have a guess how the tax is done in a compliance business, it's done from the financial statements. Yes, there's there's there's there's tax involved in it, but it can be learned.

SPEAKER_00:

Yeah, love it. Um so where do we go to from here? We've got uh our proposal calculation done.

SPEAKER_01:

Uh this leads straight into sales. This this leads into then articulating a value, you know. This leads then into your USP, your unique uh selling proposition. You know, there's 10 accountants in my town. You need to have an answer while they come to you.

unknown:

Yeah.

SPEAKER_01:

The unique selling proposition. So um, you know, and people don't like to be sold to, they like to buy. And you and you know, you'd you'd always rather buy from a friend than a salesperson. Yeah.

SPEAKER_00:

So um partner gives it the final key. So can we just touch back on that again? Old way versus new way, old way versus wise way when it comes to pricing.

SPEAKER_01:

Yeah, the old the old way is that you hire a superstar and one accountant does everything. So they do, you know, the setup of the job, they do the importing, they do all the journals, they do all the working papers, and they even like try and check their own work, and the partner just does the last, you know, uh, the last uh 15, uh, 20% of the job. The wise way is that the bookkeeper does their part, the uh senior accountant does their bit, the senior production manager theirs does the quality review or sweep of the job, which is only uh limited hours anyway, and then the client manager does the final bit. So you get this team effort, but the people at the lower end, um, their cost um is much lower uh than the most senior people, and and arguably so you get you can get just as good, if not better, profitability in a team environment. That's the that's the wise way.

SPEAKER_00:

Are we missing any missing any other big gaps in the conversation around pricing? Anything else that comes up time and time again for you in it when we hit pricing?

SPEAKER_01:

I think the biggest thing is that people don't increase their pricing with inflation.

SPEAKER_00:

Yeah.

SPEAKER_01:

You know, wages go up every, you know, tend to go up every year. Um people just are scared to increase their prices. That's what I'm saying.

SPEAKER_00:

So if we look at the root cause of that, is it just a um a fear that clients won't accept it?

SPEAKER_01:

Yeah, lack of time too, lack of time because particularly if you fix fee, it's easy just to send out the same fee every year.

SPEAKER_00:

Yeah.

SPEAKER_01:

You know, so lack I'd say lack of time, uh, lack of management, lack of being organized, lack of planning. It's a quad two activity. So yeah, and then I mean, look what I've just showed you here. This is this is planning. This is at its core, not urgent, but important. The easy way to do what I just did using that tool is to say, oh, I'll just have a guess. I think it's worth this.

SPEAKER_00:

Yeah.

SPEAKER_01:

I I think, you know, I think that here's a job, I've seen this before. I'm not going to go into the detail. I'm too busy. I just work, I reckon it's just worth$1,500. I reckon it's just worth$1,200. Right. But this is the whole point, Warty. What you don't mat what you don't manage, sorry, what you don't measure, you can't manage.

unknown:

Yeah.

SPEAKER_01:

So you're not measuring anything. You know, you're not, you're not, you're not planning the job. You're not even measuring how much time is spent on the job.

SPEAKER_00:

It's also quad one thinking or uh short-term thinking, because for the time you save of plucking a quote at the start, you lose in profitability at the other end. So, you know, like it makes much more sense to, you know, we saw how quickly you put that quote together. Obviously, there's more to it from a planning and uh review perspective, but like yeah.

SPEAKER_01:

Yeah, it's just scoping it out. Yeah, it's scoping it out. Like Ed Channel always say that you know you make or break your money on the scoping, and the scoping is working out who needs to work on the job um and how much time that person is needs to spend on the job. If you've got those two things, you know what the charge out rate is. So you can price a job effectively, you can also look at the gross profit. It's just it's just planning, it's good management. Yeah, it's it's good management to have a map to know where you're going.

SPEAKER_00:

Love it. Thanks for tuning in to this episode of The Wise Way. If today's episode sparked an idea or helped you see things differently, please don't forget to leave us a review. And if you haven't subscribed to the podcast on your favourite platform yet, please go ahead and do that as well. Let's continue the conversation here through YouTube or any other social platforms that you can find us on. And just remember, if you're not a subscriber of our weekly Friday tip newsletter, you can get that to your inbox every week going forward. Whether you're starting out or scaling up, you don't have to do it alone. Let's build a business that works for you the wise way. We'll see you in the next episode.