renew group 2007 transform your pricing shannon vincent, cpa managing partner renew group pragmatic...

ReNew Group 2007www.renewgroup.com

Transform your Pricing

Shannon Vincent, CPAManaging Partner ReNew Group

Pragmatic and Professional Strategies and Solutions to Help you Grow your Business More Effectively

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

Today’s Agenda

• Questions from Last Week• Why Value Pricing• New Practice Equation• Client Selection• What Clients Want• Implementation

Desired Outcome

• Foundation for increased pricing and profitability

Review from Last Week

• Practice Growth Checklist

• UpFront Contracts

Some Facts on Value Pricing

Truths on Value Pricing

Benefits Costs

Cash Flow Risk

Profits Change

Value Imprecise

Timesheets Measurement

Clients

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

New Practice Equation

Let’s look at your firm in a different way

This guy gives us a clue…

The ‘old’ practice equation is obsolete?

The ‘old’ practice equation

RevenuePeople power

Prod’y Rate= xxOBSOLETE?

The new practice equation

ProfitabilityIntellectual

capitalPrice

Effective-ness= xx

Note: not revenue, but

PROFIT

Intellectual capital

• Human capitalTeam membersKey volunteers

Intellectual Capital

• Social Capital

Clients, suppliers, vendors, networks, referral sources, alumni, and reputation

Intellectual Capital

• Structural Capital

everything else

• 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

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

Take Away

• The rules of the game have changed • Focus on creating value and selling

your Intellectual Capital

Breaking the link between timesheets and pricing

You are ABSOLUTELY what you charge for

And you will never receive more than you think you are

Four crucial points

• The client buys expectations• The client buys results• The client NEVER buys hours• Therefore you do NOT sell time

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

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

How to’s

• Positioning – easier to do with prospects

• FPA’s• Testing• Analyzing the numbers

Questions

Client Selection

Two Key Questions:

• Are you serving people that you don’t like?

• Are there clients that you serve unprofitably?

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

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?

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?

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?

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?

Quantitative

• Minimum Fees• Minimum Size – Profits, Revenue,

Employees

Questions

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

What Your Best Clients Want

Client Advisory Board

• 8-10 A Clients• Structured questions, process and

follow up• Constructive

What Your Best Clients Want

• Business • Leadership• Regulatory/Professional• Experience and Service• Educational and Communication

*Feedback, Solutions, Questions

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

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)

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?

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

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

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?

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

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

Questions you will ask: Regulatory/Professional

• What are your concerns about internal controls and data security?

• Do you feel properly insured?

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

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

Solutions: Experience and Services• Respond to email 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

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

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?

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

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

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?

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

Implementation and Building on our foundation

• New Practice Equation• Breaking the Link• What A clients want• Implementation

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

Sample FPA’s

• Fixed Price Agreement• Key Points in FPA

-Making the intangible tangible-Commitments to one another-Deadlines-Financial Terms-Change Order

Sample FPA’s

Resources

• Professional’s Guide to Value Pricing: Ron Baker

• www.verasage.com– Professional’s Guide to Value Pricing. Ron

Questions

Next Webinar

• Team Member Expectations: Breakdowns and Breakthroughs and ReNew Partnerships

• Thursday August 30th• 1:30pm Eastern

The power of any idea is in the implementation

shannon.vincent@renewgroup.com

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