The biggest pricing mistakes I have made in my bookkeeping business
Are you struggling with pricing your bookkeeping services? Pricing is not easy, and in fact, it can evoke a lot of negative emotions, including fear and anxiety. It was certainly one of the areas that I struggled with the most while growing my virtual bookkeeping business. Although it was tough at times, I learned so much through the process. Would you like to skip past the trial and error and get straight to the good part? Keep reading or click on the video linked below and I’ll share the biggest pricing mistakes that I have made in my bookkeeping business, and the very valuable lessons that I have learned.
The 5 biggest pricing mistakes I’ve made
First off, I want to share my pricing mistakes with you, then we’ll get to the part where I share my biggest lessons learned. Have you made any of these mistakes too?
Mistake #1: No service agreement
One of the biggest mistakes I made when growing my virtual bookkeeping business was not having a signed engagement letter or service agreement with my client. Early on, I would just take on a client for whatever they said they needed. There would be no agreement between us as to what I was going to do (or not do), and there was certainly no agreement as to what I was going to charge for my services. So Unfortunately, I didn’t get paid for some of my services early on because of that lack of clarity.
Mistake #2: Pricing by the hour
My next mistake was pricing my services by the hour. Seems easy enough, since it’s just assigning an hourly rate and multiplying that rate by the number of hours that you work, right? Unfortunately, while it may seem easy to do it this way, this can lead to not getting paid for your services or not getting paid for all of your services. I learned that lesson when I was pricing by the hour in the early days of my business. My clients were getting sticker shock at my final bill, and then they didn’t want to pay. Or sometimes, I was too embarrassed to charge them what I actually had done for the job and so I would just charge less.
Mistake #3: Working before getting paid
Another big pricing mistake that I made was doing a project without getting paid first. I’ve taken on some really big projects and didn’t ask for any sort of deposit or advance. Unfortunately, there were times when the client got sticker shock at the end of the project, and they didn’t want to pay for my services.
Mistake #4: Undercharging for my services
This is a very common mistake that most new bookkeepers do. It gets better with more experience over time, but after being in the business for over a decade, it still even happens to me sometimes. There will be times when we didn’t do such a good job of scoping out the project and we underestimated the effort that it would take to complete that project, and we’ll end up undercharging for our services.
Mistake #5: Overthinking my pricing
My last pricing mistake involved a lot of wasted time overthinking my pricing. Initially I thought that the way to combat the fear and anxiety of pricing was to just come up with this big spreadsheet, and complex pricing formulas. I spent hours working on pricing spreadsheets, counting transactions, and counting the number of accounts and bank accounts that clients had. Unfortunately, this led to spending so much time on my pricing that it added much more anxiety to the whole process.
Lessons learned about pricing my services
What was the cost of making all of these pricing mistakes? I’ve estimated that I have probably lost about $20,000 over the course of my business. But in the process, I learned some very valuable lessons that have more than made up for the $20,000 that I have lost in making pricing mistakes.
Lesson #1: Let it go
One of the most valuable lessons I learned was to just let go of the mistakes, to let go of the negativity and focus instead on improving and learning. We are all going to make pricing mistakes. You are going to make pricing mistakes and it’s okay. It’s part of being in business.
Lesson #2: Get a signed engagement letter
The second lesson that I learned is to have a signed engagement letter for every project that I do, from every client that I work with. If I don’t have a signed engagement letter, then I don’t do the work – period. Having an engagement letter has allowed me to have a clear understanding with my client of what I will do and what I will not do, and also specifies the price I will get paid for my services. There are no surprises for either me or my client.
Lesson #3: Get paid in advance
The third lesson I’ve learned is to get paid upfront for my services, before they begin. By getting paid upfront, I now know that I have a client who is willing and able to pay for my services (which takes away a lot of the fear and anxiety that we talked about earlier). As you can imagine, getting paid upfront also helps with maintaining a positive cash flow.
Lesson #4: Pricing is a process
The fourth lesson I’ve learned is to continue to refine my pricing over time. As I said before, we have all made pricing mistakes. We’re going to make pricing mistakes and the most important thing is to then take those lessons and apply them to the next client. So if you find that you didn’t charge enough for a particular project for the client that you’re working on now, you know know that you’ll need to charge more when you take on the next client for that type of project.
Lesson #5: Keep it simple
The fifth pricing lesson I’ve learned was to simplify my pricing. I learned to not overthink pricing so much, and to not spend hours and hours on spreadsheets. Instead, I worked towards making things simpler for my own peace of mind, and I have found that it actually has worked really well. When I don’t overthink pricing as much, I seem to be able to focus on making better pricing decisions.
Although I sometimes cringe to remember the biggest pricing mistakes I have made in my bookkeeping business, I am thankful for the valuable lessons I’ve learned along the way. Let me know in the comments what you have learned about pricing. Are there any lessons that you’d like to share with me? I’d love to hear from you.
If you’re looking to jump start your virtual bookkeeping business, check out my free Virtual Bookkeeper’s Toolbox or visit the 5MB Academy to see all my free and paid resources. I’ve also got plenty of free video resources for virtual bookkeepers on my 5 Minute Bookkeeping YouTube channel. You can also connect with me and get plenty of bookkeeping advice, stories, and resources in my online community. Join the 5 Minute Bookkeeping Community on Facebook to connect with fellow bookkeepers, where you can ask questions and share your journey. I’ll see you there!