Practice Perspectives | Spring 2025
Accounting for Value: Unlocking the Power of Pricing
Two thought leaders share their insights on why more accounting firms should embrace new pricing models.
Art Kuesel
President, Kuesel Consulting
Moving Your Firm Forward
These days, more public accounting firms are reviewing their pricing models to stay ahead and power growth. Whether it’s shifting from hourly billing to value-based pricing, embracing subscription models, or having upfront pricing conversations with clients, firms are leveraging a myriad of strategies to drive profitability, recruit and retain talent, and improve client relationships. And, for firms willing to take the leap, the rewards can be substantial.
Recently, I had the pleasure of chatting with Ronald J. Baker and Ed Kless, both co-founders of THRESHOLD, a company that specializes in helping businesses transition from transactional to transformational, and co-hosts of “The Soul of Enterprise” podcast, which explores topics on business, economics, and professional knowledge. Here, Baker and Kless share their insights into the pitfalls of traditional billing practices, the opportunities available to firms, and actionable steps they should take to improve profitability.
WHY ARE MORE FIRMS TALKING ABOUT PRICING THESE DAYS?
Baker: After I left a Big Eight accounting firm and started my own practice, the answer to this question became more clear. Overall, I realized that billing by the hour created pretty lousy customer experience. So, in 1989, my firm began experimenting with fixed pricing, and the customers loved it. I’ve been a convert ever since.
Kless: I think the reason the profession is talking about it more is because two major studies have looked into this and found value in strategic pricing—one by McKinsey & Company and another by AT Kearney. The studies show that, by far, the leading driver in profitability is pricing. In fact, both studies arrive at a similar conclusion: A 1% increase in pricing power yields a 7%-11% increase in profit. Compared to cost-cutting measures, like reducing fixed or variable costs, it’s double or triple the profitability increase—and that’s just from improving pricing power by 1%.
WHAT ARE THE BIGGEST PRICING OPPORTUNITIES AVAILABLE TO FIRMS?
Baker: One of the biggest opportunities is shifting away from the billable hour to value-based pricing. Hourly billing forces firms to sell time rather than outcomes—and clients don’t buy time, they buy results. When firms price based on value, they align their incentives with their clients’ success.
Kless: Another major opportunity is the subscription model. The accounting industry has been stuck in a transactional mindset for decades. But when you look at other industries—whether it’s software, entertainment, or even health care—there’s a move toward subscription-based services. If accounting firms embrace this model, they can create predictable revenue streams and build deeper client relationships.
WHERE DO YOU SEE FIRMS FALLING SHORT ON PRICING THEIR SERVICES?
Baker: The biggest mistake I see firms make is relying on cost-plus pricing. They figure out their costs, slap on a profit margin, and call it a day. But cost-plus pricing ignores the customer’s perception of value. Pricing should be determined by what the service is worth to the client, not by internal cost structures.
Kless: Another common pitfall I see is that firms are afraid to talk about pricing upfront with their clients. They avoid the conversation and then hit the client with a surprise bill at the end. This erodes trust and creates friction in the relationship. Upfront pricing discussions set clear expectations and foster transparency.
CAN YOU SHARE SOME SUCCESS STORIES OF FIRMS THAT GOT IT RIGHT?
Baker: There’s a firm that transitioned from hourly billing to value pricing that saw their revenue per partner increase by 30% in just one year. They focused on packaging their services, clearly communicating their value, and standing firm on their pricing.
Kless: One firm I know implemented a subscription model for tax planning services. Instead of billing hourly, they offered tiered membership plans. Not only did their client retention improve, but their annual revenue became more predictable and resilient.
FOR FIRMS LOOKING TO REVAMP THEIR PRICING STRATEGY, WHERE SHOULD THEY START?
Baker: First, abandon the billable hour mindset—stop tracking time and start thinking about outcomes. Next, engage in value conversations with clients—ask them what success looks like to them and price accordingly. Finally, experiment and iterate. Pricing isn’t a “set-it-and-forget-it” exercise; it requires continuous refinement.
Kless: I think mindset is key. Firms need to recognize that pricing is a skill—one that can be learned and improved. Therefore, invest in training, read about pricing psychology, and most importantly, test new approaches.
After speaking with these two thought leaders in the accounting profession, I believe it’s clear that many, if not most, firms are leaving money on the table by not understanding the value placed on their services by clients. So, here’s your homework: If you aren’t going to ask your clients what their perception of value is, allow one of your other partners or associates to do so—then reprice your work.
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