Millennials can play a role in move to value pricing
A growing number of industry pricing experts are urging CPA firms to jettison the billable hour and replace it with a fixed-pricing model, or even the more optimal model of “value pricing.” Few public accounting topics spark as much controversy as this one. Many firms have adopted value pricing in recent years, but others have been reluctant to do so. To give our members additional insight into this important topic, we sat down for a series of Q&A sessions with author and consultant Ron Baker, an unabashed value-pricing champion. These conversations give readers an in-depth look at the reasons a firm should consider switching to value pricing, and the nuts and bolts of how a switch might work. The following Q&A session, the seventh in the series, focuses on how young CPAs can contribute to the process.
Why do young CPAs need to know about value pricing?
Baker: For the younger generation, I think the change is coming. I’m not going to say the end of the billable hour and the time sheet is within reach, but I am going to say it’s within sight. Firms are going to be gravitating more and more to this model, and I think the younger CPAs need to understand it and drive as much of this change as they can because they’re going to be taking over firms or perhaps starting their own, and this is a much better way to run a practice.
To prepare, I would suggest they read the Journal of Accountancy articles that have been published, as well as books on the topic. This will help them understand that value to the customer is in no way related to time spent, and for most CPAs, this is an epiphany.
Why is it important for young CPAs to be actively involved in their firms’ transition to value pricing
Baker: I think a big challenge in making this transition to value pricing is the unlearning that has to happen. Younger members of the profession don’t have that many years of baggage to unlearn with respect to billable hours and time sheets and all the traditional methods that we use. So it’s easier for them to embrace something that’s new and help drive change.
So what are some of the roles that young CPAs can play in the process?
Baker: A lot of the firms making pricing transitions have set up value councils. Some of them have even appointed chief value officers—and some of those CVOs have been in their late 20s. So they’ve been on the younger side. I don’t think there’s a direct correlation between age, even experience, and pricing ability. So being on the value council is definitely something that the young CPA can be involved in, and maybe they can even aspire to be the chief value officer if their firm is going to appoint one of those.
If they work in a smaller firm that does not have a value council, they can still volunteer to help the owner/partners with pricing. No pricing should happen in a vacuum, and the more minds the better. Becoming one of these minds will add tremendous value to the firm, while enhancing your pricing competency, which is a good skill to develop. Read more on the Journal of Accountancy.