McLean Delmo Bentleys partner Jamie Bishop says while firms are trying to implement value-based fee structures to align themselves more competitively in the market, clients are opting for the more traditional time-based models.
“We certainly are predominantly time-based. We would prefer to be value-based and certainly we are trying to move to value-based pricing, but I find the biggest barrier to that is our client base themselves,” Mr Bishop said.
“Whenever I present a proposition to a client around a value-based fee model or a traditional time-based fee model, I find most often the client wishes to choose the time-based model. They feel more comfortable with that structure.”
Mr Bishop said customers were often wary of accepting value-based fee structures because they did not believe in the value of some services and therefore had an “unwillingness to move to that approach”.
“Some services, income tax compliance for example, lends itself to a time-based fee structure simply because clients actually don’t see any value in it, so in other words it’s something they have to do as a requirement, but they actually don’t see any value in lodging their tax return,” he said.
“It’s pretty hard to have [a] value-based approach in something they see no value in, whereas maybe project-based work, consulting work, often has a much more value-based outcome or an outcome that they see value in, so in those type of engagements obviously it’s much easier to have a value-based approach in terms of fees.”
For more competitive pricing models, firms should initially look at implementing a mix of value-based and time-based fee structures.
Open discussions with clients about the benefits and value of services would help them consider alternative pricing models.
“Certainly, we’ve seen over the last two to three years, significant price competition. I don’t see any end to that in 2017,” Mr Bishop said.
“Increasingly, as time goes on, [clients will] become more comfortable with more of a value-based approach.”
Commenting further on the issue, managing partner of HLB Mann Judd Tony Fittler said that value-based pricing schemes were harder to implement as often “issues” would arise when agreeing to a fair price.
“The issue with value is: is the value of an assignment 5,000 or 10,000 or 15,000 [dollars]? If you’re an accountant you might say ‘I’ll sell you 15,000 of value,’ but business people are generally looking to pay less, so if they can [get] 15,000 dollars worth of value for 5,000 [dollars],” Mr Fittler said.
“To be honest probably accountants have got a fair bit more [of a] way to go before you can say that [value-based pricing] is really working properly.”
