Why CPAs should switch to Value-Pricing with Ron Baker (podcast)

Many of you we presume are already familiar with Ron Baker because he truly is a trailblazer in the accounting industry. If this if your first time hearing Ron speak, then you are in a for a real treat!

Ron is essentially the father of “value-pricing” in the accounting world. We could not be more excited to share his and Brannon’s conversation with you. In 1989 he first began switching from charging for time (billable hours) to charging fixed prices for value delivered.

Among his many accomplishments, Ron has been a CPA owner, authored seven books, and now has a radio show. He has helped firms across the country convert to a value-pricing business model. Brannon Poe of Poe Group Advisors sat down with Ron to pick his brain about what brought him to the profession, how he came up with his innovative ideas on revenue, and his advice on implementation and success that you can bring to your own practice.

Ron Baker actually began accounting when he was 15! He credits his career path to his accounting teacher in high school and his father who owned a barber shop. Ron started to do bookkeeping and taxes for his dad and his dad’s friends after becoming interested in his high school course. After college, he started working for KPMG.

In the late 80’s he started his own practice and began operating on a value-priced business model. He wanted to provide his clients with a better customer experience. He realized the century-old billable hour business model had some major flaws:

  1. The billable hour focuses on time spent on a task rather than the completion of the job.
  2. The billable hour does not benefit the client-accountant relationship as end cost can be shocking for clients.
  3. The billable hour does not encourage efficiency.
  4. Judging staff and self on time spent working rather than quality of the job done does not promote growth.

In contrast, the benefits of value-based pricing are astounding.

For one, it fosters the client-accountant relationship. It actually helps the CPA build and retain trust. It helps the CPA focus on what the client actually wants. When a client has the cost of services upfront, they can make informed decisions without the blowback of sticker-shock after the fact. This can enhance client retention and eliminate what Ron himself found uncomfortable when first starting out, confrontation over services rendered. Value-based pricing also has the benefit of innovation. When it no longer benefits the firm to take the most amount of time possible on a task, it allows the team to be efficient. Suddenly when the focus is on doing the job to completion, the best and fastest way you can, new technologies become an assist rather than a threat to earning potential.

Ron also shares his best advice for converting or starting a practice without billable hours.

He says you can do this with new or existing clients, or both. Do it one client at a time. He says making the transition both slow and steady allows you to work out the kinks office wide and create a seamless customer experience. The ripples of this change will be endlessly beneficial to your practice and to your employee and client retention.

Please listen to the full podcast with Ron Baker and Brannon Poe. Ron shares some of his ideas on why the accounting profession is slow to switch to a new business model, what he fears and gets excited about within the CPA world, and some of his best advice and book recommendations.

 

 

Some important parts to highlight:

1:30 – Ron’s background

5:50 – Why Ron switched to value-pricing

9:18 – The ripple effects of converting to value-pricing

12:40 – What is wrong with the billable hour

21:21 – Why time sheets are not a measure of efficiency

33:07 – How to convert to value-pricing

36:58 – Ron’s advice for someone just starting out

41:11 – Ron’s perception on the biggest threat to the accounting profession

51:06 – What Ron sees as new opportunities for firms on the horizon

55:19 – Ron’s book recommendations: The Future of the Professions by Richard Susskind and Daniel Susskind; Life After Google by George Gilder

1:00:21 – Ron’s best life advice

 

About Ron Baker: Ron is the founder of VeraSage Institute-the leading think tank dedicated to educating professionals internationally-and a radio talk-show host on the www.VoiceAmerica.com show The Soul of Enterprise.  He’s also the Chief Value Officer at Armanino LLP. Ron has toured the world, spreading his value-pricing message to over 210,000 professionals. He has been appointed to the American Institute of Certified Public Accountant’s Group of One Hundred, a think tank of leaders to address the future of the profession; named on Accounting Today’s 2001 to 2007, and 2011 to 2018, Top 100 Most Influential People in the profession; voted among the Top Ten Most Influential People in the profession in 2012—2018; selected as one of LinkedIn’s Influencer Bloggers; inducted into the CPA Practice Advisor Hall of Fame in 2018; and received the 2003 Award for Instructor Excellence from the California CPA Education Foundation.

Contact Ron: Twitter @ronaldbaker; email ron@verasage.com; LinkedIn

 

About Brannon Poe: Brannon is the founder of Poe Group Advisors and has been facilitating successful accounting practice transitions throughout the US and Canada since 2003. Brannon started his career in public accounting as an auditor with Ernst & Young before working for several years in auditing and tax preparation for the regional firm of Elliott, Davis & Company. He is the author of “Accountant’s Flight Plan: Best Practices for Today’s Firms” (published by the AICPA and CPA Canada), “On Your Own: How to Start Your Own CPA Firm,” as well as multiple blogs and the “Accountant’s Flight Plan” podcast.

Follow us on Twitter @PoeGroupAdvisor and LinkedIn