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Delivering Nuclear Value in Accounting · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:10] Hey, everyone, and welcome back to the show. I'm Blake Oliver, David Leary: [00:00:13] and I'm David Leary- Blake Oliver: [00:00:14] And we are joined today by Joe Woodard. He is an author, consultant, business coach, and national speaker. Joe has trained over 125,000 accounting and business professionals in areas of practice, development, changing technology trends, strategic consulting and how to maximize the use of accounting software in their practices. He has been recognized by Accounting Today as one of the top 100 most influential people within the accounting profession, and has been featured repeatedly in Insightful Accountant, Accounting Today and Accountingweb, both in articles and in video interviews. Joe is the managing member of Woodard Events LLC, which provides education, coaching, resources and a community for small business advisors, and many of our listeners may be familiar with scaling new heights, the conference associated with Woodard. Joe, welcome to the show. Joe Woodard: [00:01:04] It's always great to be here, guys. Blake Oliver: [00:01:06] Yeah, great to have you. Joe Woodard: [00:01:07] Uh, obviously on our show, we talk about, you know, raising your prices, charging for your services, you know, surge pricing, um, all those types of things. But so I think maybe at a high level, Joe, like, the core root of it is like, you can't raise your prices if your clients don't value your services. So that's exactly right. What does that mean? Like how do you get your clients to value what you're doing? David Leary: [00:01:28] Well, first, and I like to refer to the Cobb value curve on this. You know, my friend Ron Baker got me, you know, going on the Cobb value curve many, many years ago. And it just holds truth. It is truth, right? That the more differentiated you are as a and x axis is differentiation, y axis on the Cobb value curve is how relatively valuable you are. Right. So if you are, if you have relative value and you're doing it with a unique and differentiated product, people are going to value you. And if you don't, they won't. So I like to tell the story, to kind of get it out of the industry for a minute and something that we can get our minds wrapped around and then bring it back to the industry. Um, I was at a county fair one time, walking around these little booths with shops like you do, and the very next day, a very dear lifelong friend of mine had had just had, uh, a baby. It was their one year birthday. So I had in my frame of mind that I needed a really unique and differentiated. There are the words birthday present for this, uh, this little kid, this little baby. So I stumbled across this booth where this this. It was an artisan, really brilliant craftsman. Made these little wooden ducks from scratch. His own design. David Leary: [00:02:40] He carved them out by hand. They they were fantastic. Uh, and and they you wind them up and they would bob their heads and everything in the bathtub. It was it was an amazing little toy. And it said wooden ducks, $20. Well, let's look at the Cobb value curve and let's apply it to the ducks. How many places can I go? Oh, thank you, Blake, for pulling that up. How many places can I go to find this particular wooden duck carved in this way, handcrafted and hand designed by this person. Nowhere else in the world, right? I can't go to Walmart and find this duck. But then if if we're looking at the Cobb value curve, and if you're listening to this in the car, you can Google, you know, with your phone while you're driving. I'm kidding. But the point is, go back and look at it afterwards. And you can you can see that I didn't just have a high relative value. I had a nuclear event by the Cobb value curve. Right? So I had a birthday present the next day. Really wanted to impress my friends. Um, so my nuclear event, compared with the uniqueness of the duck, meant I was willing to pay a very high amount of money for this duck. So here's where the accountants make the mistake. They sell the same toy as Walmart Walmart in this case being H&R block QuickBooks Live bench. David Leary: [00:03:56] You know, pilot. They sell the same product or the same duck as Walmart, and they then stand up something at the county fair and they think, okay, now I can charge a premium because of the fact that I'm delivering it in a very personable way. Okay. So that's one of the reasons that we have a value problem. The other reason we have a value problem is we don't position products to the highest possible relative value. The problem with this, this person in their ducks, I mean, how many adults walking around a county fair because not a lot of little small children walking around. That's not the audience. That's not the demographic. How many adults walking around one of these little artisan fairs have a birthday party the very next day. Now, I guess a lot of them have grandkids. You can make an argument, but the relative value of something like that is compared to somebody that's selling, you know, healing oils or something for everybody's aches and pains. So you've got to know your target market. You've got to know where you can cast the net widest on relative value. You do those two things, and more often than not, the person showing up at your front door is going to be willing to pay. You pay a premium. Joe Woodard: [00:05:08] So can you give an example of an actual service, like a service at the accounting firm I'd be offering? That kind of falls in this model. Like how is that service sometimes really commodity, and how is it sometimes a part of a nuclear event? Blake Oliver: [00:05:21] I'm going to pause you, David. Yes, there. Because before we move on, I really want to dig in a little more to this value curve because I've seen something like this before, but I've not um, I didn't know it was called the cob value curve cob. David Leary: [00:05:35] That's correct. Blake Oliver: [00:05:35] And I want to describe it for our listeners. So if you're listening, close your eyes. If you're driving, don't do that. Uh, and, and let's talk about what this chart is. It's actually pretty simple. We've got a y axis that shows relative value added. So the vertical axis is, you know, you go up and that's high value. You go down. That's low value. Easy to understand there. Then the x axis, the horizontal axis is the volume of work available, which in the context of that story about the duck, I assume that is like the the availability of gifts, you know, the ease of obtaining them. I suppose the time you. David Leary: [00:06:16] Have in the one percentile of. Yeah, of ducks available. Blake Oliver: [00:06:20] Like I need this thing now. Right. That would be closer to the, uh, zero on the x axis. And then as you go out farther, you know, that's that's how much more time you had if you had a month to get this gift. Then, you know. Right. So so the relative. David Leary: [00:06:36] Value though, Blake just kind of put a point on it. The relative value is the timetable. I needed the gift tomorrow making it nuclear rather than just valuable. Got it. Um, so so yeah, that that timetable shoots you from relative to nuclear. Um, and but the, the volume of ducts available in the market is the x axis. Okay. And so this person is in the one percentile of how many ducts are available in the market. Joe Woodard: [00:06:59] Because he has a very special duck. David Leary: [00:07:01] He's a very special duck okay. Blake Oliver: [00:07:03] So up and down we've got relative value added horizontal left and right. We've got volume of work available supply that sort of thing. And then and then the line on the chart is this, uh, curve that goes from very high, close to zero and then dips down and then approaches. Zero on the y axis as it goes way out to the right. So it's this. It's like a slide, right? It looks like it looks like a roller coaster going down for me. And the further. Joe Woodard: [00:07:36] You get out to the right. David Leary: [00:07:37] You hockey stick up in value. You can you can slide really fast down into commoditization. Joe Woodard: [00:07:42] And the farther you get out to the right, it's commodities that are super cheap and people are just buying them based on the price. And whoever can be the nickel cheaper, nickel cheaper. And that's that's basically where it just keeps going out to the. Yeah. David Leary: [00:07:52] So I'm actually gonna read Wikipedia's definition of commodity, because it's because I think a lot of accountants are gonna get this is gonna feel like a sting. And I don't I mean it to be a healthy sting, like a little injection of of something that will inoculate you from sickness. Okay, so here, here's the sting. A commodity is an economic good, or in this case, a service that has full or substantial fungibility. That is, the market treats instances of the service as equivalent or nearly equivalent. Here comes the zinger with no regard to who produced them. So I just need to get the tax return done. And I don't care if it's firm A, firm B, firm C, or if it's TurboTax live. I just need to get the turbo. I just need to get the tax return done. That turns the tax return into a commodity. And then it's up to us to make it more than that. And that'll get us back kind of to David's question is how do we become more than that? Blake Oliver: [00:08:50] So David, go ahead and ask again. Joe Woodard: [00:08:52] Yeah, I mean, the duck example is fine, but like what's a service I'm going to have at my firm that maybe it's a commodity because the perfect storm is I have a low volume product or item or service. My firm provides that people are willing to pay a lot for it because it's a nuclear event. It's happening right now. Right. So what's a specific service or example of this? David Leary: [00:09:12] Well, I want to go ahead and refer to the nuclear event thing because we we do play from that. I mean, there are nuclear events. I just received an IRS audit notice. Uh, I've received four notices from the state of whatever, and now it's become personal liability issue because we let it get nuclear. So we do have nuclear events in the profession. The problem is we don't realize that they're more valuable to be treated with urgency than the non-nuclear events. So that's where the Cobb value curve could help you on the y axis is treat a nuclear event as a nuclear event, especially when those nuclear events are manufactured by the client through their procrastination or their negligence. Um, okay. So that's number one. But now to finally answer David's question, the x axis, how do we make a unique duck? Right. So, um, I'm gonna give you a couple of things that you can do that, that fewer of your peers are doing. Um, and then we're gonna and I'd love to talk about which one of these, uh, scaled competitors and artificial intelligence might displace the fastest, because what's the point of going there if it's if those two things are going to start making the ducks. Right? So, um, let's talk about comptrollership services. It's an interesting category. People mean a lot of things by it. But what I basically mean by Comptrollership services, my definition is it's where accountancy meets operations. David Leary: [00:10:35] Um, so you're to some degree they're outsourcing the administration and operations of their back office to you. It doesn't have to be full back office process outsourcing, which, by the way, is a form of a duck. Not a lot of people do it at scale. Well, so there you go. But it could be something just short of that. So something other than just complete back office process outsourcing, uh, would be a type of comptrollership services. Examples would include accounts receivable curation to mitigate bad debt expense, uh, monitoring procedures to mitigate fraud and risk of fraud. Um, you could have, um, spend management that's actually extremely popular and relevant one. And that could involve putting in budgets and also curating them, but also by the client having the ability to enforce them, having the authority to enforce them. And you could help the client to develop spend policies and then put in technologies that will enforce those policies in real time, like spend cards, intelligent spend cards integrated with the general ledger. The bottom line is with this is the differentiation with accounting services. I am recording what happened financially with comptrollership services. I am affecting what happens financially, and the biggest way I affect it through Comptrollership is the reduction of expense overruns. Blake Oliver: [00:11:58] And there's fewer firms that are capable of providing comptrollership services on an outsourced basis. And so the volume of work available is lower. So you move up the curve of value. David Leary: [00:12:07] That's correct. Fewer people are making that duck, right? All right. And then of course, there's financial planning and analysis. Fractional CFO. It has a lot of terms, uh, that people use. Uh, fpna is the one we like to land on because if we say become a fractional CFO, people without an MBA and sometimes without a CPA, sometimes even if they have a CPA, they get scared by the Terme people that are MBA people, that executive CFO experience. They get really nervous by that terms. So and we deal with a lot of Non-credentialed CAS practices here at Woodard. So we like the terms financial planning and analysis. Fpna. Um, but it's essentially the same thing. Only you're not doing all the banking, relationship management and board, uh, reports and things that a CFO would do. Um, but cash flow projections, uh, financial measurements that are matter, that are actionable, that you filter out and really surface up to where the owner's limited attention can, can focus on those, maybe monitoring dashboards and alerts for them, uh, with financial metrics, it is financial coaching, but it's not fractional CFO. You never actually represent the company to lenders and third parties like that. Blake Oliver: [00:13:20] So the reason then to answer this question that we've posed here, why don't clients value your services? The reason that clients don't value services is because there's a lot of people doing it, and there's not a lot of relative value in their minds. It's just something they've got to get done. And so you can't charge a lot of money for that kind of work. David Leary: [00:13:42] And it gets price anchored. Yeah. And if you think about what we call a commodity out there, you know, paper towels, the only way that bounce can make make up the difference on paper towels is to sell a tremendous amount of paper towels. Right. Um, make pennies on the roll and sell, you know, millions of rolls. So we unless we can scale, which is, of course, what the scaled competitors are doing. Right. They have the billions of dollars, uh, the PE funding and so forth, or the organic monies like H&R Block and Intuit. When you have the billions of dollars and can build the model to scale, then your margins can be razor thin and you're going to be just fine, because that's how people make fortunes on commodities. But most of your listeners, Blake, don't have billions of dollars for research and development and custom AI coding and hiring and marketing, and they can't run Super Bowl commercials, so they're going to need to make it up on value. Joe Woodard: [00:14:43] How much of this is just accountants and bookkeepers doing this to themselves? I think nuclear events are happening all the time, and people recognize the nuclear event, and then they just help the client for free, like, oh my God, this is they want to be helpful. David Leary: [00:14:55] That's exactly right. Joe Woodard: [00:14:56] We're rescuing. You're not valuing it. Then why would the client value it? Right? David Leary: [00:14:59] Yes, that's exactly right. And we are valuing it, but only from the framework of the way a firefighter would value their role. It is valuable. But the firefighter is not saying, now, how could I have my money? They're doing it out of a sense of heroism, which is exactly what you said. David, maybe. Blake Oliver: [00:15:15] We need to go back to the, uh, origins of firefighters, which it's fascinating. You know, like originally the firefighting companies were private companies, and they would go out to a fire and they'd they'd wait outside until the owner came and paid them, and then they'd put out. I had no. David Leary: [00:15:30] Idea that that was the case. Blake Oliver: [00:15:32] Yeah, it was very effective. Joe Woodard: [00:15:33] I have rural metro. I have a bill sitting on my kitchen table. And if I don't pay that on time, if there's a fire at my house, they will not service me. David Leary: [00:15:42] That's interesting. But you're right. We do pay for it. We just pay for it collectively. But I didn't know that there was an individual like check system on that. But yeah, and. Blake Oliver: [00:15:50] Actually it was an ancient in ancient Rome. You know, men are always thinking about ancient Rome. So I got to bring it up on this podcast. Uh, I forget who it was, but one of the wealthiest senators in Rome like that was his business. He had a firefighting business, and he would show up at a building that was burning, and he would buy the building and then put out the fire. And the price would drop as the burn as the building burned further and further. David Leary: [00:16:15] Yeah, that is interesting. So, um, but yeah, we're doing just the opposite of that, right? We're actually saying, let me rescue you then, and let's figure out how much you owe me. Blake Oliver: [00:16:23] Right? Yeah. We're not we're not capturing the value when it's, uh, a really nuclear event or unlike the firefighters. David Leary: [00:16:29] Of today in the United States, we're not government subsidized. Yeah, so we're just out there giving it away, um, and and enabling people to continue doing the same behaviors they've always done. Wait to get financials until August. You know, wait until the fourth notice before I call my accountant, you know, don't report my state unemployment changes and expect it to all be okay for 20 states. Uh, and yet we rescue them, which is otherwise known as we enable them. Blake Oliver: [00:16:57] Yep. I, uh, I saw an interesting tweet that I want to share with you, Joe, but it sounds like David has something to say. So while I pull up the tweet, you go, David. Perfect. Joe Woodard: [00:17:06] So all right, now I got clients, a set of clients that value my services. Like how do I I mean, I know you're a big Disney guy. There's Disney Plus and even an earmark. We have an earmark plus offering like how do you like what are the what's the plus like what do you how do you extract more value from those clients. David Leary: [00:17:22] Yeah. So of course the the plus for accounting services is Controllership and fpna. So those are forms of pluses. But I'd like to talk about the plus for tax because that's probably the one that's harder to conceive. And it's a better way of kind of uh, highlighting the model. So if I am a tax preparer, I have a corporate tax client, individual attached and everything. So normally I would only talk to this person about once a year, um, in order to get the tax return done. Therefore, I'm responsive to the deadlines. I am the necessary evil. I'm part of the death and taxes. I'm a utility. I may be extremely valued utility, but I'm still I get called just like I value my corporate attorney. But I hope I don't have to call him. Right. So I it's one of those, those kinds of relationships. Well, I can flip the paradigm on that with a plus. And I can say instead of charging you, you know, $8,000 a year, I'm going to charge you $1,500 a month or even $1,000 a month is a nice little kicker upward. But let's go with $1,500 a month, $18,000 a year. And if you want this package, which is a tax subscription package, and that's really the key to a plus, is it some form of subscription. David Leary: [00:18:38] So if you if you have a tax subscription package then I will do several things as part of the package, one of which is unlimited notice handling. And you say unlimited. As soon as you know you've built a model that will do, that will have about 30, 50, 75, then 100 people subscribed as long as it's headed there. Because for every one that sends you 20 notices in a year, first, if you're the tax preparer and that happens, there's a problem. So but every you know, for every one that sends you 20 notices in a year, there's gonna, they're gonna be a hundred more, 75 more to send you none. Right. So it just it all comes out in the, in, in the actuaries table really. And you're like an insurance company. You're playing to the to the probabilities and and the normalization, the median. So, so and like Ron Baker would say and I agree that you're going to measure the profitability on the portfolio, not the individual client who sends you disproportionately more notices in a year. So is the portfolio profitable. And it will be if you if you structure it. Right. So the other thing after I've done unlimited notice handling is I'm going to do quarterly tax, uh, analysis and strategy, not just planning, which is a, you know, incremental guess at a tax return analysis, planning, credit research. David Leary: [00:19:54] Uh, we're gonna we're gonna look at the thing holistically. And how can we manage your entire, uh, tax liability and tax strategy all the way through to who you are as the business owner? My individual client. Now, with individuals, it gets easier to plus it up and create a subscription model because you've got the certified financial planning piece, uh, which has a lot of residual revenues built in and a lot of retirement planning and personal financial planning. But that's the idea. And and this is the real key. It's not just that the plus is something fewer people are offering. It's that you're offering it intentionally because a lot of tax practices would put on their website. We do tax analysis, we do tax strategy, we do tax representation. And that's great. The question is, how many times are you the one reaching out to your client, proactively engaging them every quarter, every, you know, semiannually in these services? Or are you offering those for a minority of your clients and leaving all this other opportunity on untapped subscriptions? Breed intentionality. Intentionality infuses value, and it does it on a cadence. Blake Oliver: [00:21:10] I love this theory, Joe, and now I want to apply it to a real world situation. I saw a tweet that I got to share with you in our audience. This is Teddy G on X, Teddy G said, and the username is at Ops accounting. Have a 30 year old client making 5.5 million per year. Not happy. I've had returned too long and has big refund charge $600. Says he's losing money with opportunities. Never does tax planning. Now you all know why we complain about some clients. Pound sand terminated. So this client is making $5.5 million per year. Teddy explains in the thread below that it's a W-2. It's actually a very simple return, very not complicated at all. Right? It could be somebody making $50,000 a year. It's that easy. It just happens to be a big number on the W-2. Now I want to know, Joe, how could Teddy G have plussed this engagement to make the client happy, get more than $600 and not fire them? David Leary: [00:22:10] First, I want to know where this guy works, that he makes 5.5 million on his W-2. Because that job a global global finance. Okay, yeah. So I would then say that certified financial planning is where I would head with somebody's wealth management. Right. Blake Oliver: [00:22:25] But let's say we don't even want to add a new service. Like, how could we just make this a better service for this guy? So the client wasn't happy and was complaining, right, that it was taking too long to get the return done? David Leary: [00:22:36] Well, then just crawl sell cars because, well, but this is an individual. Blake Oliver: [00:22:40] Well, so here's my idea. My idea would just be like, tell this guy I will put you first in line every year, and you're going to pay me $5,000 for this search process. David Leary: [00:22:51] That's great. So if you want your return done earlier, you pay a premium. If you're okay till October 15th, you pay less. I love that idea. Blake Oliver: [00:22:58] It's simple right? Part of the problem is that for some reason, we treat all our clients the same, right? And they all go into a big bucket and we just pull them out until we're done. But like, why not prioritize, right? David Leary: [00:23:09] I like that, and I used to do that actually in the inverse Blake and I stopped. I used to say that if you get me the information that you need to get me within a certain time frame, you'll pay X, and if not, you pay a premium. It's a 20% increase per per deferred tax engagement. But that's like punishing them for helping me. So I did start flipping that around about a year ago. Um, and I and, and I started saying that we that you will pay less if you will pre-decide not because of your procrastination, not because you disrupted me, not because you didn't give me my source documents. I needed to get it done on time. But if you'll pre-decide to wait till October 15th, you'll pay less and it is working much better so you don't have to care. But it's working much better with the people I coach. Joe Woodard: [00:23:55] Yeah, using it like a carrot to motivate them to get their ducks in order and get back to ducks. David Leary: [00:24:00] Yeah, back to ducks. I like that I like callbacks. Yeah. But yeah, if it really matters to them then they're gonna pay them the bigger premium and they're gonna get their stuff to you faster. And it is basically it's kind of making it their problem, but it's also measuring what their relative value is. It's very comp value curve. Blake Oliver: [00:24:19] I want to fact check myself from earlier in the episode. David Leary: [00:24:23] Okay. Back to Rome. Blake Oliver: [00:24:24] Back to Rome. Okay. So the senator was Marcus Licinius Crassus. He was one of the richest men in ancient Rome, a Roman general and statesman. And his worth today, I mean, it's hard to say exactly what it would be, but it's estimated that it would be a billionaire. Something like $1.4 billion is is what his wealth was in Rome. Uh, so you can imagine, like his power and wealth at that time. And I just find this fascinating, that part of the way he made his money is that he created the first ever Roman fire brigade. Fires were almost a daily occurrence in Rome, and Crassus took advantage of the fact that Rome had no fire department by creating his own brigade, 500 men strong, which rushed to burning buildings at the very first cry of alarm. Upon arriving at the scene, however, the firefighters did nothing. While Crassus offered to buy the burning building from the distressed property owner at a miserable price. If the owner agreed to sell the property, his men would put out the fire. If the owner refused, then they would simply let the structure burn to the ground. After buying many properties this way, he rebuilt them and often leased the properties to their original owners or to new tenants. And that's how he became one of the largest landlords property owners in Rome. And most Romans. As seems to be the case, uh, it seems to be where we're going today. Most Romans were renters. The vast, the 99% were renters. So he made a lot of money. Yeah. David Leary: [00:25:57] All right. So so you're picking up on a concept here that we have not yet introduced. We had, uh, I've used the word commoditization, which is the diminishment in commercialized value because of the oversupply of a product or service. Um, but commodification is a completely different word. And this person was commodifying, uh, fire and rescue. So now they were doing it in an unscrupulous way. You can commodify in unscrupulous ways, you can commodify in an ethical ways. So, you know, the folks that rolled around from town to town with the snake oil on their carts and basically selling alcohol as medicine, were commodifying alcohol at a premium. Two, so that would be a bad commodification. But. But I love if we just stopped at. There was no fire brigade. He created a private one. He went out and serviced a need, which is fire rescue that had not previously existed in Rome. That's good commodification. Yeah. And and so we've already talked about how we can offer existent services that nobody else offers. Right. Uh, or. Excuse me. Not that fewer people offer. So fewer people are doing spin management, fewer people are doing fpna. So therefore it's already commodified, but it's rarer and it's higher in relative value, higher on the cost value curve. But I would encourage our listeners to explore ways to commodify what is not currently monetized. So, for example, some of the people that were pioneers in value pricing were the very first to commodify their knowledge. Blake Oliver: [00:27:41] This this this sounds a lot like Productization is that it. David Leary: [00:27:45] Is a form of productization. Yes, except Productization is a packaging. Commodification is a value assignment. But so it's like the step before productization. But what you just did, Blake, with your whole approach that you introduced here, um, of of changing the price based off of when I do the tax return is commodifying the calendar. It's powerful ways of thinking. Um, so I would I would challenge everybody listening to say, what else might I commodify. And if we come back to the knowledge. Knowledge is a deep well. It's not that you've commodified knowledge. So. Okay. I don't have a unique commodification. I can be unique in what kind of knowledge I'm commodifying and how I apply it to client need, because maybe you understand their operations better than anybody else in accountancy. Or maybe you've got a unique system or process. So, you know, to manage an accounting firm, there are 20 different ways to get it right, but we've commodified a particular system called Woodard's ideal Practice model that has seven different components with 300 hours of training. That is both a commodification and a product ization of our knowledge. And it it's a scaled economic. Blake Oliver: [00:29:03] Joe, it has been so great talking to you about this issue, and I hope that more of our listeners will take your training and and learn how to move themselves up on this Cob value curve. Where can people follow you online? Learn about this. David Leary: [00:29:19] So the easiest thing is just my last name Woodard. Com but if you use two like everybody else does and call me Woodward, I don't know where that'll send you. So one w woodard.com. And it'll get you to all the things we've talked about. Blake Oliver: [00:29:33] Great chatting with you Joe. Hope to see you around soon. David Leary: [00:29:35] It's always great to be here.