ReNew Group Transform your Pricing Shannon Vincent, CPA Managing Partner ReNew Group Pragmatic and Professional Strategies and Solutions to Help you Grow your Business More Effectively
ReNew Group Session Schedule Leadership and Firm Growth Strategic Planning and Key Profit Drivers Marketing, Selling and Growth Value Pricing – Myth or Reality Team Member Expectations: Breakdowns and Breakthroughs
ReNew Group Today’s Agenda Questions from Last Week Why Value Pricing New Practice Equation Client Selection What Clients Want Implementation
ReNew Group Desired Outcome Foundation for increased pricing and profitability
ReNew Group Review from Last Week Practice Growth Checklist UpFront Contracts
ReNew Group Some Facts on Value Pricing
ReNew Group Truths on Value Pricing BenefitsCosts Cash FlowRisk ProfitsChange ValueImprecise TimesheetsMeasurement Clients
ReNew Group VP Thoughts We are all not good at pricing Places VP may be appropriate -Individual tax returns that are high value or straight forward -high net worth bundled services -financial review for businesses Place where you may want to be cautious -audits -if you aren’t sure of how long it will take to produce tax return or f/s Value Pricing is not for everyone
ReNew Group New Practice Equation
ReNew Group
ReNew Group Let’s look at your firm in a different way
ReNew Group
ReNew Group This guy gives us a clue…
ReNew Group The ‘old’ practice equation is obsolete?
ReNew Group The ‘old’ practice equation Revenue People power Prod’yRate = xx OBSOLETE?
ReNew Group The new practice equation Profitability Intellectual capital Price Effective- ness = xx Note: not revenue, but PROFIT
ReNew Group Intellectual capital Human capital Team members Key volunteers
ReNew Group Intellectual Capital Social Capital Clients, suppliers, vendors, networks, referral sources, alumni, and reputation
ReNew Group Intellectual Capital Structural Capital everything else
ReNew Group Price Price intellectual capital based only on the value to the client NOT the internal cost of Human Capital NOT on the profit desires of the owners of the firm And certainly NOT on the labor hours involved
ReNew Group Effectiveness Takes precedence over efficiency Understands that imprecise measurements of the right things are infinitely more valuable than precise measurements of the wrong things A business does not exist to be efficient, it exists to create wealth for its customers Workflow – web-based workflow and communication tools – Office Systems
ReNew Group Take Away The rules of the game have changed Focus on creating value and selling your Intellectual Capital
ReNew Group Breaking the link between timesheets and pricing
ReNew Group You are ABSOLUTELY what you charge for And you will never receive more than you think you are worth
ReNew Group Four crucial points The client buys expectations The client buys results The client NEVER buys hours Therefore you do NOT sell time
ReNew Group Relying on Timesheets is destroying your worth For too long we have let our price be largely—or solely—determined by the antiquated billable hour paradigm. It is time to relegate that paradigm to the ash heap of history, because it is not at all relevant in an intellectual capital-based economy Ron Baker
ReNew Group Here’s a way to get started Start thinking now about PRODUCTS not services Then turn those products into experiences Then price them with NO regard for hours Value is always (and only) in the eye of the customer
ReNew Group How to’s Positioning – easier to do with prospects FPA’s Testing Analyzing the numbers
ReNew Group Questions ???
ReNew Group Client Selection
ReNew Group Two Key Questions: Are you serving people that you don’t like? Are there clients that you serve unprofitably?
ReNew Group Why client selection is important Pricing Cultural issues Bad clients drive out the good clients Limited number of resources Drain on you and your team Quality of life / fun factor Profitability Value of business Exit strategy
ReNew Group Services How often does this client meet with their existing service provider? How certain are you that you will get the opportunity to cross-sell additional services? How sophisticated would you say this client is? What is the state of their records and accounts?
ReNew Group Billing Did the client spend a long time focused on cost and fees during the interview process? What is the likelihood that you could generate at least $10,000 in fees per year from this client? How would you describe the client’s level of profitability (income-potential)? How much growth has the client experienced in the past three years?
ReNew Group Opportunity and timing How would you describe the potential for future growth for this client? From what you know of this client, how likely is it that you will see a stream of referral work from them? What potential exists to charge premium prices if the client needs their work done in your busy period? How open is the client to working with your team members as opposed to always requiring partner access?
ReNew Group Values and leadership How much appreciation do you believe this client would show for your expertise and the value you provide? What is your perception of how loyal this client would be to your firm? From your discussions with this client, how ethical and honest do you believe they are? How well do you believe the client would grasp opportunities with a positive mindset, determined to make the most of them?
ReNew Group Quantitative Minimum Fees Minimum Size – Profits, Revenue, Employees
ReNew Group Questions ???
ReNew Group Take Away Client Selection is critically important Must be a part of the firm – Institutionalize Client Selection Use these questions as a basis for developing your own Client Selection Criteria
ReNew Group What Your Best Clients Want
ReNew Group Client Advisory Board 8-10 A Clients Structured questions, process and follow up Constructive
ReNew Group What Your Best Clients Want Business Leadership Regulatory/Professional Experience and Service Educational and Communication *Feedback, Solutions, Questions
ReNew Group Market feedback: Business I do not understand all the technical aspects of accounting; IRS code, SAS, FASB and frankly don’t really need to learn that stuff I don’t know what you know My accountant doesn’t understand what I do Cash flow is a concern I’m always focused on increasing profitability I could be better at planning and goal setting
ReNew Group Solutions: Business Speak the business owner’s language Obsessively learn about your client’s business and their key issues Focus on Cash Flow Focus on Profit Improvement Have annual meetings with clients that focus on strategic and financial matters (historical and future)
ReNew Group Questions you will ask: Business Do you have a planning process that includes targets, budgeting and cash flow? What are your critical success factors? What things must you get right in your business? How happy are you with the profitability of your business and your return on investment? Do you have a strategic plan that you adhere to and update on an annual basis?
ReNew Group Market feedback: Leadership I want an accountant with personality and a sense of humor I wish my accountant would acknowledge their own challenges There are too many moving parts in my business, personal and legal affairs. I can’t keep track of it all It is lonely at the top and business life is difficult It is difficult at times to see the forest through the trees
ReNew Group Solutions: Leadership Personality/Sense of humor – be human, let your guard down at times Be the cornerstone of all their financial affairs Let them know you think about them when you are not together Show them the big picture – industry research, benchmarks, trends (get involved in their trade association) Watch and follow their competitors Organize them with calendars, milestones, targets and communication points Know your own challenges
ReNew Group Questions you will ask: Leadership What is your favorite sports team? What do you do for fun? Who do you consider your right hand for your financial affairs? What keeps you awake at night? Tell me about where you see your company and industry in the next 3 years Would you be interested in talking with business owners similar in size but not competitors?
ReNew Group Market feedback: Regulatory/Professional I expect my accountant to take the high road I don’t want my accounting firm to be an extension of the IRS Keep me out of the news Protect my assets
ReNew Group Solutions: Regulatory/Professional Be independent and objective Don’t be an extension of the IRS Put yourself in their shoes…if X then Y Assess risk, review their insurances and financial plan Review their privacy policies, data security
ReNew Group Questions you will ask: Regulatory/Professional What are your concerns about internal controls and data security? Do you feel properly insured?
ReNew Group Market feedback: Experience and Services I don’t always get timely service and returned phone calls I don’t want to do stuff last minute I am not as deadline driven as my accountant I’m not sure when I’m going to get my work back I’m not sure who works on my stuff and who to talk with I hear from my accountant once a year
ReNew Group Market feedback: Experience and Service I hate getting charged for a 10 minute phone call Save up the bills. I don’t want to pay a $200 bill. It’s a waste of time I don’t like surprises – taxes, bills, my accountant is out of town
ReNew Group Solutions: Experience and Services Respond to and phone calls right away by setting performance standards Set expectations of when you will get the work done (sets deadlines for you internally) Position your younger team members and communicate who does the work and who the contact person will be Be proactive – set minimum touches
ReNew Group Solutions: Experience and Service Don’t charge them every time you talk with them i.e. do not nickel and dime your clients Go the extra mile Be proactive
ReNew Group Questions you will ask: Experience and Services Do you think you are getting timely communication? When would you like to get your work back? Are you happy with our availability? Can we set up quarterly or semi- annual meetings?
ReNew Group Market feedback: Education and Communication I’m discreet about my success. It would be good to know other successful business owners that I can learn from We don’t know all of the services that you offer My team needs training and education I’d like more relevant information about my business and industry from the firm
ReNew Group Solutions: Education and Communication Proactively introduce your clients to one another Introduce them to other service providers that you trust Run seminars for your clients and their team members – simple topics Send industry specific newsletters Cut out articles that are relevant and send with a note Sit with each client and tell them all of the services you offer, ask questions. Letters and a website are NOT enough
ReNew Group Questions you will ask: Education and Communication Do you get together with other business owners that have the same challenges as you on a regular basis? What areas in your business are you going to need the most help with in 2006? What is your biggest concern with your team? How do you compare to others in your industry?
ReNew Group Take Away Your clients and prospects need help You have a fiduciary responsibility to help them Asking your clients if you are taking care of them is very important Run your own CAB –Client Survey Need help with a CAB contact us
ReNew Group Implementation and Building on our foundation New Practice Equation Breaking the Link What A clients want Implementation
ReNew Group To Do’s Analyze your client base and services and determine your average hourly charge rates Look at write offs Upgrade or “terminate” the bottom 10% of your clients Test with Prospects - easier Test Value Pricing by using FPA’s Test by getting some clients and not using timesheets for pricing Establish pricing committee or Chief Value Officer
ReNew Group Sample FPA’s Fixed Price Agreement Key Points in FPA -Making the intangible tangible -Commitments to one another -Deadlines -Financial Terms -Change Order
ReNew Group Sample FPA’s
ReNew Group Resources Professional’s Guide to Value Pricing: Ron Baker –Professional’s Guide to Value Pricing. Ron Baker
ReNew Group Questions ???
ReNew Group Next Webinar Team Member Expectations: Breakdowns and Breakthroughs and ReNew Partnerships Thursday August 30th 1:30pm Eastern
ReNew Group The power of any idea is in the implementation