A few weeks ago, I listened to a keynote by Mark Koziel, the new AICPA President, and something he said completely blew my mind: using a 3-tiered pricing model for audits.
As someone who works in software, I’m used to thinking in terms of willingness to pay and value-based pricing, but I’d never thought about applying this to audits. Back at PwC, we always priced audits based on rates x hours and gave clients a single price—setting the pricing anchor and negotiating from there. We never tried to upsell our clients. Looking back, this approach feels outdated!
Mark’s concept got me thinking: If I ran an audit practice, how would I develop my 3-tiered approach for pricing?
Like the accounting/ CPA/ nerd I am, I spent some time imagining this over the weekend, and here’s is my overview of why/ what and how
Why Use a 3-Tiered Pricing Structure?
The beauty of a 3-tiered pricing structure lies in its simplicity and effectiveness. It’s a proven model that many industries—especially SaaS and consumer goods—use because it works. Here’s why:
1️⃣ Appeals to Different Client Needs: Not all clients value the same things. A tiered model offers options for cost-conscious clients as well as those who prioritize deeper insights and customization.
2️⃣ Encourages Upselling: With clearly defined tiers, clients often gravitate toward the middle tier, which is designed to provide the most value for the price. This also forces the partners at your firm to upsell. There is no way out of this. Each audit is presented with 3 numbers no matter what.
3️⃣ Anchors Perceived Value: The Premium tier (top tier/highet price) acts as a reference point that makes the Enhanced tier feel like the “best bang for the buck.”
4️⃣ Drives Efficiency: By offering lower prices for remote, tech-driven engagements and higher prices for more customized services, firms can align pricing with operational efficiency. If you choose the cheapest option that is a fine…. But you are now playing by my rules. There is no more white glove service.
The 3-Tier Pricing Model for Audits
Here’s how I’d structure my 3 tier services:
Basic Tier (Cheap)
- Cost: Equivalent to what my firm would charge today.
- Includes:
- Audits performed during the offseason to avoid busy-season pressures.
- Fully remote engagements to minimize disruption and costs.
- Clients must use the firm’s standard technology for data collection and analysis.
- Who it’s for:
- Clients who only see the audit as a compliance exercise and are focused on keeping costs low.
Enhanced Tier (Moderate)
- Cost: ~18% markup from Basic.
- Includes:
- Audits performed during busy season to meet tighter deadlines. When demand is high, prices shall rise
- Advanced analytics, such as reconciling banking data to accounting data (Thank you, Audit Sight! 😊). Here is where I start to upsell my clients.
- Who it’s for:
- Clients who want added value from their audit without heavy customization.
Premium Tier ($$$)
- Cost: ~30% markup from Basic.
- Includes:
- Onsite engagements for clients who need a more hands-on approach.
- Custom reporting (thank you auditsight) and benchmarking analysis to provide strategic insights.
- Who it’s for:
- Clients seeking a highly personalized and collaborative audit experience.
💡 The Goal: To nudge clients toward the middle, Enhanced tier. The Basic option provides a low-cost entry point, while Premium acts as an anchor that makes the Enhanced tier feel like the best value.
The Questions That Drive the Pricing Model
After I do the normal questions to quote the audit (how big is the company, how many entities, how does the company make money), here are the key questions I’d ask:
1️⃣ What are your top priorities for this audit?
- Why ask: Understanding client goals helps focus on value-added areas. Are they just checking the compliance box, or do they see this as an opportunity to gain strategic insights? If the only want compliance, now is my chance to tell them there is more to an audit than just getting the opinion.
2️⃣ Is there a hard deadline, or could we perform the audit during the offseason?
- Why ask: Flexibility in timing can reduce resource strain for your team.
- Impact on pricing: Offseason audits align with the Basic tier, while busy-season work fits Enhanced or Premium.
3️⃣ Do you prefer the team to be onsite, or can the audit be performed remotely?
- Why ask: Onsite work increases costs due to travel and logistics. It also impacts staff morale, so it’s important to ensure they’re compensated fairly.
- Impact on pricing: Remote-friendly clients align with Basic or Enhanced tiers, while onsite work fits naturally in Premium.
4️⃣ Are you willing to use the latest technology to get the audit done efficiently, or do you prefer a hands-on approach?
- Why ask: Technology streamlines audits, reducing manual effort and errors.
- Impact on pricing: Tech-savvy clients align with Basic or Enhanced tiers, while hands-on approaches often lead to Premium.
5️⃣ Would you find value in additional insights, like advanced analytics or benchmarking analysis?
- Why ask: Advanced analytics and benchmarking provide significant value to clients.
- Impact on pricing: These services align with Enhanced or Premium tiers.
Why This Approach Benefits Both Clients and Firms
1️⃣ For Clients:
- They get to choose the level of service that best fits their needs and budgets.
- They can see exactly what they’re paying for and the value they’re receiving.
2️⃣ For Firms:
- Encourages clients to adopt practices that improve efficiency, like offseason work or using technology.
- Creates opportunities for upselling without feeling pushy.
- Differentiates the firm from competitors who still offer one-size-fits-all pricing.
Final Thoughts
The traditional rates x hours approach served its purpose, but it doesn’t reflect the way clients think about value. By shifting the focus to client priorities and willingness to pay, we can reimagine audit pricing to better serve both clients and staff.
