In this solo episode I tackle two of the most common questions I get asked about: pricing & diagnostic reviews!
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In this solo episode I tackle two of the most common questions I get asked about: pricing & diagnostic reviews!
In this episode you’ll hear:
Resources mentioned in this episode:
Thanks for listening. If this episode inspired you in some way, take a screenshot of you listening on your device and post it to your Instagram stories and tag me, @ambitiousbookkeeper
For more information about the Ambitious Bookkeeper Podcast or interest in our programs or mentoring visit our resources below:
Visit our website: ambitiousbookkeeper.com
Follow the Blog: ambitiousbookkeeper.com/blog
Connect on Instagram: instagram.com/ambitiousbookkeeper
Connect on LinkedIn: Linkedin.com/in/SerenaShoup
Connect on Facebook: Facebook.com/serenashoupcpa
Follow on Twitter: twitter.com/serenashoupcpa
Thank you for your support of our show. If you haven’t left a review yet it’s super simple. Please go to: https://www.ambitiousbookkeeper.com/podcast and leave your review.
Podcast Publishing Tools we use:
There are two topics that I get asked. About a lot. And those two topics are diagnostic reviews and of course pricing. So, in this Episode today I'm going to talk a little bit about both. So, buckle up and keep on listening.
So first I want to start off talking about pricing. And specifically, a trap that I don't want you to fall into. And that is a trap of imitating the pricing of other bookkeeping companies that have posted their pricing on their websites, companies like bench and pilot, maybe QuickBooks live, those types of companies.
And here's a couple issues. Why mainly you really don't know what kind of model exists behind those doors of that business. and I tended to do the same thing early on in my business. So that's why I'm trying to help you not fall into this trap as well. What happened when I imitated pricing of other bookkeeping companies, was it resulted in me underpricing my services because a.
I was doing things that those other companies weren't like offering more value, do not discount the value of the personal touch. And be my cost to deliver those services is probably different than theirs. For a couple of reasons. So, companies like bench in pilot or actually tech companies, they're not accounting firms.
A startup or a tech company business model is very different in several ways, but I'm going to address the two main ways that drive this pricing issue. Number one, they are venture backed, which means they can operate at losses for longer than we can. Hopefully you're not operating at a loss at all.
they were working to increase the valuation of the company for their investors. And guess what? That does not always mean that they're worried about profitability, unfortunately, like we are. And number two. They are tech companies, like I said, they're utilizing probably proprietary AI and cheap offshore labor to do the work behind the scenes. Whereas most of us are filling the role of accountant and bookkeeper ourselves. Meaning our cost of service is much higher because you want to be able to pay yourself a livable wage.
Right. Now, what about QuickBooks live? Should you price? According to them? This could be a good starting point and I would not dip below what QuickBooks live is charging. and we call this the base price. When, when I talk about pricing in my program, the bookkeeping business accelerator, I always recommend having a baseline price it's, non-negotiable, you're not willing to go below that price. And the way that you get to that is.
By backing into it, figuring out your, your profit goals and backing into your revenue goals and all that stuff. So that is an exercise that I take you through. Step-by-step inside of the bookkeeping business accelerator, which is always open now for enrollment. The link is in the show notes, but like I said, you always want to have a baseline. So maybe.
Imitating QuickBooks live is good. As far as like setting a baseline. To figure out what your, what the market is willing to pay. So. By doing this research or figuring out what the market itself is willing to pay. Now, your clients may vary slightly. Yours might be more price sensitive or less price sensitive. And so that's, that's when it comes to tweaking your pricing and figuring out what your specific client base can tolerate.
But in general, you don't want to go below what QuickBooks live is charging. Now. I tried to dig a little bit deeper into, the QuickBooks live whole situation. And to see if, since QuickBooks live as part of Intuit, which is a public company. You can access their sec filings online, however,
Their bookkeeping services are not their main source of revenue. And in fact, they could very well be loss leaders to QuickBooks, but we really have no idea because you again, cannot see behind the scenes, even with the transparency. Quote, unquote of SCC filings because they're not detailed reports. Like we would look at.
for, internal purposes, when we're making business decisions, they're very high level. Everything is really grouped together. So, it's still really hard to have visibility into what makes up each revenue stream? So, and like I said, QuickBooks is only a small portion of the entire Intuit company revenue and by their quarterly sec filings, it's really difficult to know for sure. How much of their quote unquote online services, revenue and related costs.
Is actually attributable to QuickBooks alive because it's grouped in with MailChimp into a payroll payment processing fees and so many more other. revenue streams. So eventually you may discover through a profitability analysis and gaining more confidence. In serving clients that you actually should be pricing, your services higher, thus needing to target a different client base. And this is something that I've been working through. One-on-one with, one of my clients who I mentor.
And we've started to discover that if she wants to charge higher prices, she may need to target a different client base. And that could be the position you're in as well. All this to say, price your services, according to your clients, not your competition. Quote unquote. And if you want or need help with this, please feel free to reach out to me in my DMS, to talk about whether or not the bookkeeping business accelerator is a good fit for you. there's a lot in there on pricing and marketing and figuring out how to align those with your goals and the clients that you want to target.
All right. So now let's jump into this second topic. I get asked about a lot, and that is diagnostic reviews.
So, if you're relatively new starting your bookkeeping business, you may have, or may have not heard about a diagnostic review. So first I'm going to talk about what this is. You should probably be thinking about it. And how to kind of get started. So. diagnostic review is pretty much like when you take your vehicle to a, an auto shop, you know, something's wrong with it. You're just not quite sure what they're always going to run a diagnostic on you.
Or on your car rather. and so, this is basically what we're doing with bookkeeping. When a new client comes to us and they have existing records in place, and we want to know what we're getting into. and sometimes it's not all that bad and sometimes it's a disaster. Either way, we actually, in our firms still charged for this service. Some folks don't charge and it's kind of their sales funnel to do a free diagnostic.
If you have, been listening to the podcast last week, I talked to Alyssa Lang the workflow queen and she is, offering a very. high level free diagnostic for, potential clients coming her way. But it is not as thorough as what I do and I charge for, so just keep that in mind. So basically, what your diagnostic review is, is looking under the hood of a potential client's books before you get started. So, you know what, you're getting into.
So. this is a really great way to figure out a, how to price a cleanup. If there's going to be a cleanup or even a fresh start. We'll get to that in a minute. It's a great way to find out how responsive a potential client is going to be throughout the process, because typically you'll have questions throughout the diagnostic review process, at least at the very least asking for documentation to get started. And then.
Communication toward the end to wrap up a few questions that you have and kind of hand over the report. If you're going to do a report for them. it's also a really great way to kind of just learn how the business operates, because once you start digging into those books, you'll start to see how money is coming in, how money is being spent on what and how, and all the things. And it'll give you a.
kind of a crash course on what type of operations that business has. Now, let's talk about how to bring this up on a discovery call, because this is a specific question that I've gotten from an audience member on how to bring up. That you require a diagnostic when you're meeting with someone for the very first time on a discovery call.
I always let them know, like I, I started off with my questions and then one of the questions that I pre-qualify people with before they're even able to book a call with me is do they have existing records? And if so, what software did they use? And so, I already know the answer to this question. When we get on a discovery call.
So, when we're in the conversation and we're talking about the records that they have, probably QuickBooks, because that's the most common. I will tell them like, okay, great. Since you've been in business, and this is also another question, how long they've been in business since you've been in business for, you know,
Less than five years, but you're, still sort of established. You have a few years of records. how many of those years do you have in QuickBooks and, and then the answer and I say, great. One of a part of our process before we get started and are able to give a quote for anyone, we actually require a diagnostic review, which means I am going to peek under the hood of your books and see what kind of shape things are in. even if you've had a bookkeeper in the past, or you've been doing things yourselves, there's generally some, you know, some corrections that might need to be made.
but mostly we just want to be able to see, what shape things are in and if there's corrections that need to be made, we can suggest them or hand you a report at the end and let you know what needs to be done In order to move forward with working together. Or you can decide, hey, I don't really, you know, maybe the pricing or whatever, not, it's not a great fit to work together. You can take that report and give it to the next bookkeeper. So, they know what they're getting into.
It also allows us to see how many transactions are coming in each month. because if you've been around a while, you ask that question to clients, they ate may not know how many transactions come in and out every month, or B, may not be thinking about their payment processor. And they're only thinking about the bills that they pay out. And there could be a huge, that could be a huge difference, like, especially for our client base, we have online course creators and when they launch, they could have.
Thousands of transactions coming in through Stripe and PayPal, but in their mind, they're not thinking about those incoming transactions. They're just individual transactions. They're just thinking about the payout, the. The lump sum payout from Stripe that comes in their bank account. There may be five of those in one month, even with a thousand transactions, on the sales side.
So that's one of the reasons why we also do the diagnostic to see the transaction volume, to figure out what the workload's going to be so that we can create, an accurate scope and. Make sure we have the capacity on our team to support. That volume. So those are the reasons that I kind of give to our potential clients when I'm explaining diagnostic review.
And I also explain to them what to expect during the process, how long it's going to take, what they'll need to provide us, which I'll get into in a minute, because that's part of this topic. when to expect a follow-up or a proposal when it's complete. And as a bonus, like I said before, we provide them a writeup or a report of our findings and this adds value and gives them something tangible to understand like why we're charging for this. And so, they get to walk away with something, whether or not they work with us in the future. and I also let them know like, we charge $500 or whatever you're going to charge. That's typically what we charge is $500 for a diagnostic. And we will give you the report at the end. If you decide to work with us through a cleanup, a fresh start or ongoing services, we will apply that $500 to your first invoice, whether it's the cleanup invoice or a.
You know, migration invoice or the first monthly invoice. If there were no corrections that were needed. so that's kind of how I explain it to them. Having that tangible report at the end is super helpful for them because it just solidifies that you are providing value, that you did put something together. You did put work into this.
And it just makes the sell a lot easier. And then also letting them know, you can roll that $500 into your first month of services or your first invoice. And so, it's very low risk for them. Now what you need from your potential client in order to do the diagnostic is number one, you need access to their bookkeeping software. So typically, it's QuickBooks online.
so, you'll let them know, how to invite you in as an accountant. It's really side note. It's great to have these things. written out in a process form so that you can copy and paste them into an email or an onboarding document for the client, giving them. Like you've already done the, the work of figuring out exactly. Step-by-step how they're going to invite you in or grabbed the YouTube video or whatever you need to do to make it super easy for them to.
Follow your instructions. So, you will need access to their books. You'll need the bank statements for probably the full year of whatever you're evaluating. So right now, we're in 20 at the beginning of 2023. very unlikely that they would have had 20, 22 completed and wrapped up. So, we're going to assume that during this time period, we're going to be looking at all of 20, 22. So I would tell them I'm going to need bank statements.
For PDF statements for your whole entire year. So whatever bank accounts you have, whatever credit cards you have and payment processors that you have. So, PayPal, Stripe. Those types of things we'll need each month. End statement for that. and then we would also ask for corporate documentation. So, this is like there I N letter. They're LLC documents, and this is really to verify their QuickBooks set up. and their chart of account structure and so that you can make recommendations if there's issues like if they're an S-Corp, you can make recommendations on how their chart of accounts should be set up a little bit differently, or the naming of certain things, instead of owner's draws it's, shareholder distributions and things like that.
And then their last tax return. If they're a corporation. C Corp or an S-Corp because those typically you want to have a balance sheet on. The, the tax return. And so those need to pretty well tie out. And. ask them to give you a quick overview of their operations and how they receive money and how they pay money to vendors. So that's basically all we need to be able to do a diagnostic and the how is inside of the bookkeeping business accelerator. I go through this entire process.
Step-by-step in QuickBooks, online and in zero on how we do a diagnostic review and the report that we give the clients at the end. So, you get the template. Of our exact report. And, one last thing, if it happens to be a disaster, when you go into do a diagnostic and you're like, there's no way that I'm going to be able to clean this up in the time that they want it.
There's a couple options for you. You can. Price it extremely high and let them know, like in order to get this done in this timeframe. It's going to be at least X, Y, Z. and you have the potential of out pricing them and they'll go somewhere else. Or you can offer them a fresh start and honestly,
We migrate everybody off of QuickBooks anyway. So that's part of our conversation during a discovery call. Is, we're gonna look, we still do the diagnostic in QuickBooks because it's required in order to even do a migration. but. When we. Do the diagnostic, if it is completely disastrous, we will just say let's just recreate the last year in zero.
And we're just going to need bank exports. So, the XL detail, and you know, PayPal XL and all exports so that we can import into Xero and just kind of recreate it. And we've done that before, too as well, where it's like, it would just be too much work to actually fix QuickBooks before we migrate it. So, we're just going to do a fresh start and they just won't have history because if it's that much of a mess anyway, you don't want to be comparing.
Prior year history anyways. Cause it won't be accurate. So that's, that's the two avenues that you have once you complete the diagnostic. and it's also a great opportunity to be able to put them on a different software. If QuickBooks online is not your jam. All right. So, remember. Two key points today.
charge for your diagnostic reviews. And number two. Don't price at what your competitors are pricing, especially if your competitors are. online. Bookkeeping companies like bench or QuickBooks live. All right. So, thank you so much for listening to today's episode. I hope this was valuable content for you. If you enjoy listening, please subscribe or follow the show on wherever you're listening to this and, take a screenshot and share it on your Instagram stories. or shoot me a DM and let me know what kind of content you find the most valuable.
And I will try to work it into the mix. Thank you so much for tuning in again this week. And. Every week, if you're a loyal listener and we will talk to you next week.