Latest / The Accounting Podcast / Value pricing panel becomes value pricing consultation 🎙 Live at QuickBooks Connect
Transcript
- This episode of The Cloud Accounting Podcast is sponsored by Intuit QuickBooks. Accounting professionals and bookkeepers have long been at the forefront of using cutting-edge technologies to take the profession to the next level and to ensure they're delivering the best possible service to their clients. Whether you want to grow your firm or sharpen your skills, Intuit QuickBooks provides you with the AI-driven products, services, and the resources that you need to help all sides of your career take shape. To learn more about how QuickBooks Online, QuickBooks Online Accountant, QuickBooks Live Bookkeeping, and the ProAdvisor program can help you grow your practice and scale your impact, head over to CloudAccountingPodcast.promo/quickbooks. That is Cloud Accounting Podcast dot promo forward slash Q-U-I-C-K-B-O-O-K-S. QuickBooks - Backing you. Rhondalynn Korolak: People wanna do all kinds of crazy, silly stinkin' thinkin' to do it, and they just can't make the transition. Blake Oliver: Welcome to The Cloud Accounting Podcast. I'm Blake Oliver. David Leary: I'm David Leary. Lee Podolsky: Lee Podolsky. Mary Hambleton: I'm Mary Hambleton. Rhondalynn Korolak: Ronald Baker. [00:01:00] No, just kidding. Rhondalynn Korolak. Blake Oliver: Hey, Rhondalynn. Thanks for joining us so much! This is the end of day one, the Accountant Day, at QuickBooks Connect. David Leary: We've made it. Blake Oliver: We made it. Rhondalynn Korolak: Woo hoo! David Leary: A full day of recording. It's very exciting. You have to roll with the flow at big conferences like this because everybody's schedules change. People don't show up to interviews; people have personal things. But it's great because, Blake, we have to just go with the flow. Blake Oliver: We're gonna go with the flow. Two of our interview subjects could not [00:01:30] be subjected to the podcast today, so we have some substitutes. David Leary: But it was meant to be because we were gonna have a podcast to talk about value pricing. Blake Oliver: Yeah. David Leary: Rhondalynn wrote a book recently on value pricing. I was like, "This is gonna be awesome. We're gonna have the three thought leaders on value pricing," and two couldn't show up ... Blake Oliver: Yeah. David Leary: But a fan of the podcast showed up, and her firm is currently moving from the billable hour to value pricing. Blake Oliver: So, Lee and Mary, are you at the same firm? Lee Podolsky: We are. Blake Oliver: Give us your full [00:02:00] names again and tell us about your firm so that we've got a little context here. David Leary: Yeah. Lee Podolsky: I'm Lee Podolsky, President of Breakwater Accounting and Advisory in Wilmington, Delaware. We do outsourced bookkeeping and accounting for small to mid-sized businesses, non-profits, and, most recently, family offices. Mary Hambleton: I'm Mary Hambleton, and I'm the Director of Operations at Breakwater. We're trying to move towards value pricing; we're looking to be more profitable and offer more value to our clients. Blake Oliver: Fantastic, and how [00:02:30] many staff/partners/people at your firm? Lee Podolsky: Currently, we have 31 on staff and two interns. Blake Oliver: And Rhondalynn, for our listeners who may not be as familiar with you and what you're up to, what brings you to the value-pricing discussion today? Rhondalynn Korolak: Oh, look, I think, earlier this year, I published a couple of books and a workbook called "Pricing Value," and "Implementing Pricing Value." It's being distributed out of ... It's my first New York publishing contract. Blake Oliver: Ah, congratulations! Rhondalynn Korolak: Everything [00:03:00] I've done has been very Australia-focused. But Ron Baker has taken me under his wing, and the guys at VeraSage introduced me to my first publisher. That book is actually going into all the universities and business schools in about 26 different countries because of that deal. So, it's pretty cool that we're gonna teach accountants, right from the get-go, how to price properly. Blake Oliver: Wow. That's gonna pay dividends down the road. That's great. David Leary: To those accountants and bookkeepers- Blake Oliver: To those accountants and bookkeepers, yeah. For those of us who are learning it now, what can we distill, in [00:03:30] 20 minutes of a podcast episode, when it comes to moving from the billable hour to a value-pricing model? What are the challenges that you are seeing in the American market? I guess maybe that's a good place to start. Then we can hear what Mary and Lee- what their experience has been, as well. Rhondalynn Korolak: Look, I think there are many challenges; the biggest of which is people's mindset. Everyone comes into this thing with a lot of baggage. [00:04:00] When we're doing "Pricing Value," you're not actually learning something from the beginning. It's not as if you didn't know how to speak Spanish yesterday, and you are now learning how to speak Spanish. We actually have to unlearn all of the bad habits that we had that were around the concepts of hourly or cost-based pricing before we can do value pricing, or pricing value properly. That's a big thing because it takes a lot to shake bad habits. So, that would be the big one for me. People [00:04:30] wanna hang onto time sheets. People wanna do all kinds of crazy, silly, stinkin' thinkin' to do it, and they just can't make the transition. The second is you need to control your own bloody fear. The biggest thing I hear is people saying, "I don't think I'm worth it. I don't think I can do it. My clients are price-conscious." Hang on a second here ... It ain't about you. The value isn't about your value; it's about what is it worth to the customer? So, we need to reframe that conversation. We get to the value of what it's worth ... How [00:05:00] thirsty is the customer? Is the customer at their home, where they can get a glass of water, or are they basically crawling across the desert after not having drank anything for 48 hours in 40 degrees Celsius heat, dying of dehydration? The level of value is different for those two different people. We need to get to the heart of that. We need to have better value conversations. Everybody just wants a price. We were in the panel discussion and someone said, "I'm value pricing ..." I knew things were gonna go bad as soon as I heard them this ... “.. value pricing, and we [00:05:30] sent out a letter to 700 clients telling them that our prices are going up." Well, I got news for you. You're not value pricing, if you're not pricing every single client individually. You can't just send out a mass email and then try to sell the value in the back door. The value has to be set, and established, and agreed upon before you ever quote. Premature quotation is just as bad as premature ejaculation, and there ain't no blue pill for it, right? Blake Oliver: That's gonna be the clip at the beginning of this episode. [00:06:00] David Leary: Episode title ... Blake Oliver: On that- that's a great transition point now. So ... Rhondalynn Korolak: No one wants to talk after that ... Blake Oliver: So, Mary, Lee, where is your firm now in that whole journey? What's the status? Mary Hambleton: So, we have been working towards value pricing. We definitely don't wanna be ... We're not doing billable hourly anymore, but a lot of times [00:06:30] when we're figuring out our pricing, or how we have figured it out in the past is we're figuring out how many hours do we think this will take? Then we're coming up with our price, and then we're giving them that quote. Blake Oliver: Right. So, that's not really value pricing [crosstalk] Mary Hambleton: Right. We're saying- we know that's not the way to do it, so we're working towards getting away from that and understanding the knowledge that we have is something that they don't have and letting them do what they do well, so we can do what we do well, but we should get paid to do what we do well. Blake Oliver: What are the biggest obstacles for [00:07:00] you when it comes to actually making that vision happen of doing the value pricing? Lee Podolsky: I think just getting comfortable with the conversation to have with each client. As we get more confident each time, I think we'll get better and better at that. We already are very focused on each client relationship - getting to know them, what their pain points are, and everything - so it's just sort of moving that along towards our pricing in how we do [00:07:30] proposals and have that conversation upfront. So, it's a learning process for sure. David Leary: Did you have to let go of any clients? Mary Hambleton: Yes- David Leary: You have? Mary Hambleton: We have. Blake Oliver: So, there were clients that just said, "I don't wanna switch"? Lee Podolsky: They didn't value- Right, and they didn't have the value; they just weren't a good fit for us because they didn't have the value for what we were providing to them, and it just wasn't a good fit. David Leary: Did they give you the axe, or did you kinda fire them? Mary Hambleton: We fired them [crosstalk] yeah. Lee Podolsky: In a nice way. David Leary: Yeah, yeah ... Blake Oliver: What [00:08:00] kind of services are we talking about here? Bookkeeping? Accounting? Lee Podolsky: Yep. We do bookkeeping, payroll processing, controller services; anything up to the tax returns. We don't do tax returns. Blake Oliver: So, no tax in the firm at all? Mary Hambleton: No tax. Lee Podolsky: No. By choice. Blake Oliver: Oh, interesting. I see ... David Leary: What has been the hardest, hardest thing so far? Has it been selling it internally to your team? Has it been killing your time sheets? As you move on this journey, what's been the hardest thing [00:08:30] for you? Mary Hambleton: I think figuring out what's the right price, what's the right package to put together for a client, and then, do you offer multiple ones? Do you look at each client individually and figure out what they need? A lot of times when people come to us, we've been fortunate that they're coming to us. We're not having to go out looking for clients, but it's always an emergency, and sometimes, we don't have the luxury of time to figure out what they need. We need to solve an emergency right away. Blake Oliver: Right. Yeah, Rhondalynn, hat is something [00:09:00] that I always had a challenge with when I was trying to value price - and I'm not sure I ever really, really did it - was somebody comes to me, and I need to get working right away. Under the hourly model, it was easy, right? I just tell them my rate; I get going; I start billing them. With value pricing, I have to have this big conversation, understand all of their needs, and try to ... It just seems like it takes a lot more time. Do you have any tips? David Leary: Do you have to give some value away for free? Rhondalynn Korolak: I [00:09:30] think that helping someone clarify and quantify what it's worth to them, right? I think that, first of all, one price is always gonna be the wrong price, so that's job number one. You should never, ever, ever be giving somebody one price. It should always be a set of three prices, and there's reasons for that. Question number two is around this value thing. People pay only for what they value, and it doesn't require you'd have an hour-long conversation to get to the heart of value with a client. At the end of the day, what [00:10:00] you need to establish, in a nutshell, is one very simple thing, and it's often missed by a lot of people - what is the cost to that client of continuing to ignore the problem or not have the solution? If you can just ask questions that get to that one thing, you can value price. Blake Oliver: Because they'll be willing to pay anything less than the price of not fixing the problem is the ... That's the baseline. Rhondalynn Korolak: Correct. The biggest drama that I see- people say, "Oh, somebody didn't like my price, or somebody didn't see the value." It's because you have not assisted [00:10:30] them to quantify and acknowledge what it actually costs them - personally, financially, or strategically - to not have the answer to that problem. If you can do that, you can value price. Then you want to think about things like deal-breakers. I would wanna throw in ... What you wanna do is you wanna create so much economic value, it's a bloody no-brainer for them to do it, right? What you're trying to do is you're trying to create a situation where your economic value is so huge, you immediately disqualify your competitors. That could include [00:11:00] a lot of things. Like if somebody came to you, and if it was for a tax return, you could be saying ... They could say, "Well, I'm really afraid - because I'm running a tech company, and I've got this R&D thing - that I'm gonna get audited." Well, then you just take audit insurance, and you make that part of the value of your package. You're looking for their deal-breakers. What causes David to walk away from this? That is part of the value. But you've gotta think ... You've gotta practice this, and think on your feet, and ask the right questions, but it shouldn't take you hours to get to value for something [00:11:30] specific. Somebody comes to you, and they're like, "If I don't have my financial statements turned around, I can't buy my dream home." "Oh, okay. So, what would it be worth to you?" You start to have that conversation. You can get to the heart of value pretty quick. David Leary: Have you guys had a conversation like that? Do you ask your clients? Mary Hambleton: We ask them a lot more, I think, in the initial conversation about what their business is about, or what their struggle ... I mean, I guess we do- what they're struggling with ... Lee Podolsky: Right. We're listening to them and their pain points. We can identify right away if [00:12:00] they're just focused on price; that's the cost and not ... It's trying to get them past that and talking to them about what really is driving them. But what I think would be really helpful for us is sort of more of the tactical- the types of questions to be drawing that information out. So, maybe we'll be reading your [crosstalk] Rhondalynn Korolak: When you read "Pricing Value," I sort of explain it. Then, in the workbook, I basically literally have created a set [00:12:30] of checklists and scripts; everything is color-coded. It's like, "Ask these questions and then take this information ..." and that goes to economic value. So, it's like a road map to implement it. Blake Oliver: So, Mary and Lee, we've got a little bit time. You basically have a free consulting session right now with Rhondalynn. Do you have any- Mary Hambleton: I was just thinking the same thing. Blake Oliver: Do you have any questions that you would like to ask her to help you with your value-pricing journey? Lee Podolsky: Well, so we really are working on this in our firm right now, in our strategic planning for the next five years. One [00:13:00] thing that came out when we're talking about what we're offering is something that is possibly hard to quantify - the peace of mind; like having clients tell us, "I can finally sleep at night." That peace that ... How do you put a dollar on that? I don't know, but that is something that comes up a lot. Blake Oliver: It's like a MasterCard commercial - it's priceless. Mary Hambleton: Yes, yes. It's priceless. Rhondalynn Korolak: Not all pain is financial. There's personal, and strategic, as well. So, when you're dealing [00:13:30] with something like that, you would wanna be asking questions ... "If you were able to get a good night's sleep, what would that be worth to you?" Or, "If you were not getting woken up every night because of these things, how much extra time would you have?" You can start to back your way into questions around that to get more specificity. Blake Oliver: You mean actually asking the clients, "What is that worth to you?" Rhondalynn Korolak: Yeah, straight out. It's on the script. It's just straight out? I just ask ... I say, "Look, when you thought about acquiring a solution to this problem that we're talking about right [00:14:00] now, what is the most difficult thing associated with finding the solution?" [crosstalk] David Leary: If I'm an accountant or bookkeeper, that's a very scary question for me to ask my client because I'm afraid that they might say, "It's only worth $200 a month to me ..." It's a scary- to ask an open-ended question of my client like that, it's a little scary. Rhondalynn Korolak: Look, a lot of the pain that our clients are in is pretty big, right? When you take a look ... Because I'm talking about cash flow tomorrow, so I've done a lot of stats in America and compared them to what I know about Australia. 87 [00:14:30] to 93 percent of small businesses have severe cash-flow and working-capital pain. If you start to actually figure out how much cash is trapped in their business, if you start to figure out how much interest-carrying charges they're doing ... I did a pricing session last night for a bunch of people, pre-con ... We sat down, and we practiced. One of the ladies said, "Oh, it's costing us $560 a month in credit cards because we're not able to pay our credit card." The interest alone was $560 a month. Well, now you know, right, and you ... Lost [00:15:00] opportunity costs ... If you don't collect your debts quick in your business, you actually possibly have to hire somebody and pay a wage to hire somebody in your accounting department to try to collect money, that's a lost cost that you- it's not even on your radar. You start to add up all of these things - opportunity costs, interest-carrying costs, debt factoring, the cost of somebody- receivables chasing stuff - that's a lot of money, and if you add that up ... The whole point is you get your client to acknowledge [00:15:30] the magnitude of those losses. I had a client ... I'm just gonna take this back to when I was coaching SMEs, right? I had this client that was a $24 million electrical contractor. So, it's a big company, but they were carrying $2 million of receivables a month at 92 days to collection. I kept telling them, "You need to collect your debts quicker," and they all sat there going ... One day, I went in and said, "It costs you $234,000 that you're flushing down the toilet every single year because you haven't collected your debts." Well, boom! I had their attention because [00:16:00] I said, "If you got that money, you could both pay your mortgages off." So, we need to make it ... If someone's problem is $234,000, it's not that hard to tell them, "Oh, and by the way, my cost to you to fix this here and put all the systems in place will be $40,000. Thank you very much. I take Visa, MasterCard and check." David Leary: So, you guys said you're starting to go for family offices. Is that because there's opportunity to- there's just more money in that? What made you choose the family offices? Lee Podolsky: Actually, by just by being asked [00:16:30] several times. Actually, the services that we provide to the family offices are very similar. We already have the set-up, and the technology, and everything to do this for our business clients, so it's an easy addition to be using. It's just a different client segment that has a lot more concern around security, and confidentiality. Blake Oliver: Any other questions? Lee Podolsky: I guess my only other question would be around ... To me, it sounds like we would- we're almost talking to them about the return on their investment. They invest [00:17:00] in us, and this is what they would get in return. Is that right? Rhondalynn Korolak: Yeah, it's about a whole bunch of things. It's about their feelings, the solutions to their pain points, and the desired transformations in their business. "You're right here and you wanna get to there. How is that gonna happen?" So, it's more than just pain points; it sort of encompasses ... Lee Podolsky: It's interesting because that's a very different conversation than they're used to ever having with an accountant, or attorney, or anything. [00:17:30] So, it is gonna rock them a little bit- Mary Hambleton: For sure. Lee Podolsky: Because they're so used to ... "Well, I've got these proposals from these three firms," and they're trying to sort of match it all together; so, to just veer it to that conversation and really get them engaged in that is key. Mary Hambleton: Yep, absolutely. Rhondalynn Korolak: Well, and don't be afraid to shy away from this stuff ... I've done a three-hour session at QB Connect in Sydney and Melbourne several times, and I did one last night for pre-con. It is not uncommon to see tears. One [00:18:00] of the participants that was in the workshop felt uncomfortable about that, and I said, "Look, we need to be asking these questions because they may have never voiced these concerns and fears that they have to a single other human being on the planet." When you know that, and you've developed that rapport with them, you now have leverage; leverage in two ways - leverage, because you know what to price it, but also, they are extremely motivated to fix the problem. If somebody doesn't realize they have a problem, they've got all the procrastination and excuses in the world, but [00:18:30] if you can help them crank it up and realize that this is a $234,000 problem, you're gonna get action. You wanna get action because you don't wanna do the work. When you transition to value pricing, the whole thing is also about them being accountable, and stepping up, and taking action in their own business. It's not your responsibility to fix the problems. They need to step up, as well, too, and that's part of it. Lee Podolsky: Well, it makes it a true partnership? Rhondalynn Korolak: Yeah, a collaboration. David Leary: Lee, and Mary, how do people get a hold of you if they're listening to the podcast, and they wanna contact you? Lee Podolsky: You [00:19:00] can visit our website, which is BreakwaterCorp.com. David Leary: Rhondalynn, how would people get a hold of you? Rhondalynn Korolak: At PricingValue.co [crosstalk] David Leary: What about Twitter? Rhondalynn Korolak: My name -@Rhondalynn. There's probably only one of me, so it's the easy one. David Leary: Perfect and enjoy the rest of the QuickBooks Connect! Mary Hambleton: Thank you so much! Lee Podolsky: Thank you. Rhondalynn Korolak: Thank you. Blake Oliver: Thanks for joining us! David Leary: Bye, everybody.