Why is it that accountants are still reluctant to move to value pricing? Is hourly billing really that great of a business model? At QuickBooks Connect in San Jose in October of 2018, Ron Baker suggested there’s a connection between this reluctance to move forward with value pricing and self-esteem.
Think of the stereotypical hourly-based tax partner, who slyly puts the invoice for the year’s tax return in the folder along with the tax return, or who silently slides the invoice across the table at the conclusion of the meeting to go over the return. It’s as if that partner is begging for crumbs, or is embarrassed to be asking for something as mundane as payment. At least that was the method I saw at the firms I worked at.
As Baker wrote back in 2010 in Implementing Value Pricing: A Radical Business Model for Professional Firms, “Before you can charge a premium price, you first have to believe, internally, that you are worth it. If you do not think you are worth multiples of your hourly rate, your customers never will believe it either.”
Baker’s session at QuickBooks Connect, “Knowing Your Worth: The Link Between Self Esteem and Value Pricing,” delved into that connection between internal beliefs and the value of what accountants do. Though firm leaders may deny they have self-esteem issues, his list of the symptoms of low self-esteem among accountants seems a pretty accurate description of many firms:
• We do not have enough quality customers.
• Customers view what we do as a commodity.
• Customers don’t value tax returns and bookkeeping—they have to do it (negative goods).
• Customers do not understand the value we provide.
• Our people do not understand their worth.
• When customers engage in hardball negotiation tactics, we capitulate,
• Our profession has too much capacity, which drives prices down.
Survey after survey points out accountants as the most trusted of professional advisors. Other surveys find that accountants are viewed by small business owners as the most valued source of business advice. Yet what I don’t quite understand is the disconnect between the public’s perception of our profession and our own self-esteem as measured in how we price our services and what services we even offer.
As accountants and knowledge workers, Baker reminded us, “We are paid for our expertise.” But if we persist in billing by the hour, that’s making every hour we touch the customer’s work equally valuable. So three hours spent mindlessly keying in a trial balance has the same value as three hours spent reading Tax Court cases related to our customer’s situation. Which three-hour block do you think would be more valuable to the customer?
As Baker said, “Measuring your value by the hour is like measuring the oven temperature with a ruler.” In the knowledge economy, ideas are more valuable than things, and there is no standard price for ideas. The most valuable ideas aren’t cranked out assembly-line style, but come as sudden flashes of insight, often when we’re “off the clock.”
I think the profession’s lack of self esteem also shows up in a reluctance to provide higher-valued services. Accountants are afraid that since they already get pushback on bills, there’s no way they’ll pay a higher price. Yet that pushback is a cry from the customer for us to provide more value, not to drop the price.
My last two years working as a CPA were spent with a wonderful boss who had been CFO of an international business with branches across the U.S. I pointed out that he was probably the only tax partner in town with that kind of experience, and that surely there were local businesses who would gladly pay for his insights. Sadly, I think he’s still “too busy” to put that into action.
We’re so used to being the ones with the answers that we’re afraid to move into the uncertainty of advisory services. We’re afraid of what will happen if a customer asks us a question and we don’t know the answer. And after years of being the ones with the answers, we don’t know how to ask better questions so we can really help businesses owners.
You have to have the self-confidence to know that you have the skills, knowledge and experience to really help your customers beyond basic compliance work. And as Baker said, “The way you price yourself is how you project your value.”
Baker also cited a quote from Werner Erhard: “All transformation is linguistic. If we want to change our culture, we need to change our conversation.” We need to change not only what we talk about, but the words we use.
Back in the 90s, I did graduate work in linguistics, and I studied the power of words. And as a writer, I study the words used by the audience I’m writing for so that I’m writing as an insider. Australians lodge tax returns, while here in the U.S., we file them. Recently, I was intrigued by a heated discussion over on LinkedIn over whether we work in the accounting profession or the accounting industry.
So Baker suggested a few vocabulary modifications. Changing some of these terms may force you to step up your game since some of them imply a higher level of service — and more importantly, value.
Instead of training, let’s offer education. Instead of staff, let’s have teams. Instead of services, let’s offer transformation and outcomes. And instead of clients, let’s work with customers.
My personal favorite is changing from time capacity to emotional capacity. Time capacity sounds like a factory making widgets. Or a junior team member cranking out fairly repetitive tax returns. When your firm focuses on time capacity, you can make more money only by working more hours or raising your rates. But with only 24 hours in a day, this puts an artificial ceiling on your earning potential.
Emotional capacity puts the emphasis on creating the best experience and the best outcome for your customers. This can’t be done on a time-focused assembly line model. It takes time to ask better questions, listen, research, reflect and find the best solution. It’s an artisanal approach — less McDonalds and more Michelin five-star dining.
This requires taking care of yourself and your team so that you actually do have the mental freshness and energy to come up with good ideas. You can’t do this if everyone is working 14-hour days, seven days a week.
Changing the words you use can only take you so far. Baker also recommended a book by Nathaniel Branden, The Six Pillars of Self Esteem. While I haven’t yet read the book, I believe that any method you can use to enhance your own sense of the value you provide will not only help your own bottom line, but the bottom lines of the small businesses you serve.
About Liz Farr
Liz Farr, CPA, spent 15 years in tax and accounting at small firms in Albuquerque, NM. Besides tax returns of all flavors, she worked on audits of governmental entities and not-for-profits, business valuations, and litigation support. Now she's a full-time freelance writer specializing in content marketing for accountants and bookkeepers around the world.