master the map to success.
by jody padar
radical pricing – by the radical cpa
there are two basic ways to drive from door county, wisconsin, to new orleans to attend mardi gras in february. the first is to chart a course using a map or gps app. it will tell you the route to take, where to stop along the way and how long it will take to make the drive. the second way is to start the car, back out of the driveway and head south, hoping you’ll bump into new orleans along the way.
more: create more meaningful kpis | here’s how profit sharing improves your firm | productize services for consistent client value | four ways automation pushes the paradigm shift | how value pricing impacts your employees | why pricing is so disruptive | accounting disruptors are heading your way … with deep pockets | advisory work must be priced by value, not hours
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which do you think gives you the better opportunity to arrive in new orleans in time for the festivities?
scope is a lot like creating a project map showing what you want to accomplish, who’s going to do what, how you’re going to do it, what you’ll need along the way and how long it will take to get there. it includes all the specific details of what you’ll deliver to the client, including, for example, tax returns, quarterly planning, bookkeeping and cash flow management.
proper scoping benefits both your client and your team. the client knows exactly what to expect from your services because all the deliverables and pricing are made crystal clear. internally, it outlines exactly what it will take to get the deliverables to the client and how much effort will be required. the purpose is to know the exact parameters of the work you will be doing for the client so your team doesn’t overwork (or underwork) the file.
when done properly, scoping leads to strong alignment between the firm and client by putting everyone on the same page. there aren’t any surprises, and the client’s responsibilities are just as defined as the firm’s deliverables.
to scope properly, you need to know everything about the client, from business operations to financials. the better you know the client, the more accurately you’ll be able to estimate what’s involved in serving them. the goal is knowing exactly what it will take to get the work done so you’ll know your costs, the hours, the breadth and the technology. all the information collected during scoping will help you to determine a fixed and/or value price.
some initial scoping questions may include:
- how many transactions are involved?
- does the client need financial statements?
- do they need an electronic or signed compilation?
- do they need bookkeeping services?
- does the client need payroll?
- what kind of meetings and contact frequency does this client normally require?
- does the client need tax services?
these are just some of the questions you should ask to scope any particular client thoroughly. unfortunately, no matter how well you know a client and how diligently you scope a project, things happen. to ensure profitability, it’s best to add a 20 percent fudge factor to your price.