Navigating Price Increase: Accountants' Annual Dilemma

Loyalty to a brand or service is a delicate balance of perceived value, quality, and cost. For accounting firms, the decision to increase prices is often fraught with apprehension. After all, your clients have trusted you with their financial well-being, and the slightest price adjustment can disrupt the equilibrium. 

However, regular price reviews are crucial to your firm's long-term viability and growth. Consider the following:

• A survey done in 2023 shows the most common average percentage increase planned in CPA firms for pricing increases was 10%–13%, followed by 6%–9%.
• Overhead costs, including software and technology upgrades, office rentals, and ongoing education for team members, increase by about 10% year over year.
• Benefit compensation, including health insurance, has risen by about 4%, with specific increases in health insurance costs by approximately 6%​.

So, how do you balance increasing prices while not chasing away clients?

Increasing Service Prices — How Your Firm Benefits

Enhanced Service Delivery

When your firm adjusts its prices according to market conditions and service quality, it allows for investment in more efficient and advanced technologies. This, in turn, can lead to a higher standard of service delivery.

Attracting/Retaining the Right Talent

Competitive pricing enables your firm to offer better remuneration, attracting more qualified professionals and preventing turnover. It also enables you to reward current employees you hope to retain.

“In my client base, for managing partners and businesses, the turnover rates are substantial. Some are as low as 4 percent, but the highest is 54 percent. One firm never had more than 4.5 percent turnover in 30 years, but in 2021 they had more than 20 percent. With many professionals now working from home, there are many more options, and firms are taking more care, better addressing compensation and workload, as well as paying more attention to people details.”
- Randy Johnston, Founder of Network Management Group, Inc., Executive Vice-President of K2 Enterprises.

The “Right” Clients

A price increase can result in a natural segmentation of your client base, allowing you to focus more on high-value clients and niche services while potentially weeding out those clients who may be detrimental to your bottom line. The bottom line is that the wrong kinds of clients are going to cost you more money.

Sustainable Growth

By keeping pace with inflation and business growth, prices can reflect the true operational costs of your firm, ensuring a sustainable and profitable future.

Navigating Price Increases with Clients

Provide Context

Transparent communication helps clients understand the rationale behind the price hike, such as covering increased staffing costs, technology upgrades, or other operational expenses. This approach minimizes the risk of client dissatisfaction and potential loss of business. As noted by Michelle River of Fore LLC, informing clients about the reasons for price increases can lead to greater acceptance, especially when they realize the alternatives might be even more costly​.

Offer Alternatives and Incentives

Consider offering tiered pricing structures, bulk discounts, or enhanced services at the current rate for a limited time to mitigate the impact of a price hike.

The Psychology of Pricing: How to Position Your Increase

Anchor Your Services

Highlight the ongoing value your clients receive by comparing it with the new pricing structure. This creates a psychological 'anchor' that makes the price adjustment seem more reasonable and justifiable. By clearly demonstrating the benefits they are already enjoying, you soften the perception of change and reinforce the value of your services.

Present Solutions, Not Costs

Frame the price increase as an enhancement of the services you provide rather than an additional cost. Emphasize how the new pricing enables improved service delivery, increased efficiency, and greater client benefits. Position the adjustment as a necessary step to continue offering top-tier solutions tailored to meet their evolving needs, thereby presenting the change as a proactive measure to enhance their overall experience.

Managing firm pricing is a nuanced process that requires a strategic blend of transparency, value demonstration, and client engagement. By effectively communicating the reasons behind the adjustments, you not only maintain client trust but also reinforce the quality and reliability of your services. As the industry evolves, adapting your pricing strategy while keeping clients informed and involved will ensure your firm remains competitive and resilient in the face of economic shifts.