How do software manufacturers best set the prices for their law firm software? And do clients tend to negotiate a lot? The TaxTech panel addressed precisely these questions during yesterday’s Wednesday Talk.

There was a lively exchange on pricing and price negotiations amongst the group of four, led by the moderators Paul Liese from hsp and Philip Hellmig from kanzlei.land. Right at the start of the Clubhouse discussion, the majority made it clear: „In our sector, law firms haggle over every euro“.

The models offered by software providers to their clients vary: they range from maximum flexibility with a one-month notice period, tools that can be added individually and discount schemes, to a fixed-price package with a minimum contract term. It became clear that, whilst flexibility offers tax consultancy firms many advantages – they can tailor the software to their needs – it also fuels discussions about individual prices.

Fixed-price packages versus pay-per-use for individual features

How, for example, do software providers calculate licence fees for law firms? Some base their charges on the size of the firm – that is, the total number of staff – and set a fixed price accordingly. Others – sometimes at the request of their clients – charge for each new user individually. The situation is similar when it comes to the features of law firm software: there are basic packages to which individual tools can be added, or fixed bundles – in other words, pay-per-use offers versus fixed-price packages.

It became clear that models based on actual usage are fairer for customers, but also more difficult to calculate. Software providers then have to bill on a month-to-month basis and sometimes find themselves having to justify their charges all over again each time. Discussions do not necessarily arise because of the price levels, but rather because of the multitude of options offered by adding individual features.

There was a consensus that many tax consultancy firms are often unaware of just how much software development actually costs. The annual salary for a developer with the specialist skills required by these specific software systems can easily reach up to 70,000 euros. There are additional costs on top of this, for example for setting up a cloud on domestic servers. Communicating all of this is often difficult.

Clubhouse logo

How do tax consultancy firms win clients over?

When it came to the question of how to attract new clients, the group was once again divided. Promotional vouchers for specific packages? A free trial period for the firms? A demo version? The approaches were as varied as the experiences. Promotional vouchers can carry the risk that tax consultancy firms will only charge discounted prices. Furthermore, the pre-packaged bundles often do not suit individual tax consultancy firms. Offering firms certain features free of charge for a few months can sometimes work well. For certain systems, however, this is not cost-effective, as the effort required to customise the software is too high. Whilst demo versions allow tax advisers to try out new systems and tools, they cannot do so using their firm’s actual data.

One good option seems to be to work on the basis of a theoretical set-up fee. A fixed amount is set, for example 2,000 euros. If the law firm continues to use the software for at least one year, this fee is waived. If it terminates the contract earlier, the flat-rate fee is calculated on a pro rata basis. This offers manufacturers security and law firms flexibility.

What price would the customer be willing to pay?

A good approach to price negotiations with law firms is to take the initiative – in other words, simply asking what price the client is prepared to pay. To do this, however, tax advisers must, of course, be clear about the added value the software offers.

By the end of the panel discussion, one thing is clear: there is no such thing as THE perfect pricing solution. Especially as customers’ expectations and the various systems differ too greatly.