Transform Your Business with a Subscription-Based Model

The Modern CPA Success Show: Episode 96

Tom(00:00:17) - Welcome to our Modern CPA Success Show podcast today. Um, we're excited to have a really good speaker, and we're gonna talk about a book today. Um, as usual, I'm joined with my, uh, my co-host, Adam Hale. Adam is a partner with Summit CPA Group, which is a division of Anders CPA Advisors. Adam, welcome today.

Adam(00:00:34) - Thanks, Tom.

Tom(00:00:35) - Should probably introduce myself. I'm Tom Walton. I'm a virtual C with Summit at CBA Group. Um, our guest today is Ron Baker. Ron is the founder of RIS Age Institute, um, author of seven best selling books. And we'll talk, I'm thinking about two of 'em at least today. Value Pricing, a radical business model for professional firms, and then also times up the subscription model for professional firms. Um, he's also a faculty member of the Professional Pricing Society. Ron, welcome to our show today.

Ron(00:01:00) - Thanks, Tom. Thanks Adam for having me.

Adam(00:01:04) - Yeah, if we can just jump right in. I love the name of the book Time's Up. I appreciate that. Um,  and the, the firm of the future stuff. Um, you know, I, I know that even way back in like 2004, 2005, probably inspired by, by your book. Um, you know, firm of the future was kind of a, a thing that everybody would always, every time we'd go to a conference, people were always just like, okay, in the future we're gonna do this. And I know my partner and I were always shaking our head going, well, that's what we are doing , and we're not doing it very well. Can we talk about the details of that?  ?

Ron(00:01:38) - Excellent.

Adam(00:01:39) - Um, so, so yeah, the, the Time's Up I, I just like the fact that, you know, big exclamation point there. It's like, Hey, this is what we should be doing now. And I think we were talking earlier, there's, we were kind of talking about, uh, do you mind just kind of describing, um, you know, value pricing, obviously, I know that's where, um, you're really synonymous with everybody knows, you know, kind of your, your methodology there and is familiar with that. But kind of talk to us a little bit about the difference between, you know, the, the focus there, uh, you know, at business model of value pricing versus this subscription model that you talk about in Times Up.

Ron(00:02:12) - Yeah. It, and it is a business model change. And when you change a business model, a couple things happen. Uh, one is your pricing strategy changes. So Airbnb is not using the same pricing strategy as Hilton and o obviously Uber isn't using the same pricing strategy as taxi cabs. Um, but also something else changes that I don't think a lot of, uh, folks understand, even consultants, that, that do change management don't understand this. If a business model changes, the internal dashboard has to change. The KPIs change because you're creating value in a new way. I promise you Airbnb does not have the same dashboard as Hilton. And I promise you that Uber is not looking at the same KPIs as is taxi cab companies and pick any other business model. Right? Um, and that's significant because the way you create value and the way you capture a portion of that value through your pricing, that all changes and subscription is completely different than most people think.

Ron(00:03:09) - I, I, I can't, I wish I had a nickel for every time a firm told me, oh yeah, we do subscription. Our, our clients pay us monthly. That's not subscription. At least not the way I'm talking about it. What I'm talking about with subscription is you have to go to the market with a plus offering, and we can talk about the word plus that comes from Walt Disney, but it's, it's a different offering. It, because if you go to the market with a common offering, you're gonna command common pricing. But if you go to the market with an uncommon offering, now all of a sudden you can command uncommon prices. So for example, Porsche Drive allows me to subscribe, not to, they do have an option for one car now, but they allow me to subscribe to Porsche and I have a fleet of seven vehicles and I can trade off every day if I want.

Ron(00:03:52) - I can say, Hey, bring me out an s I got friends coming out. They want to go wine tasting, they white glove out an u v, they take my convertible away. They pay for everything except gas and tolls insurance, everything's covered. If I have maintenance issues, they just white glove it out. Bring me another one that's a plus offering. And people say, well, how's that different than buying a Porsche or leasing a Porsche? Cuz it's not tied to a car. You are subscribing to Porsche, you now have a one-to-one direct relationship with Porsche. And that is a different type of business model. It's no longer about the transaction, it's no longer about the math of the moment. And in our world, that means it's no longer about the scope of services because the scope of services are just a means to an end. And I think the end in the subscription model is we need to move away from pricing services and we need to start pricing what's really important, which is the relationship and transformations.

Adam(00:04:49) - Yeah. No, I, I think that was a big outline in the book. Mm-hmm. , I think you scared a lot of people though whenever you just said, don't worry about the scope of the project. . Yes. , um, you know, and I know you addressed that in the book and, and it's a common question that we get in our service offering as well. It's like, aren't you worried about people abusing you? So whenever you talk about like, not worrying about the scope and in these plus offerings, can you kind of talk through a little bit how, um, how you kind of address that, um, in the subscription model?

Ron(00:05:20) - And again, it, because it's a different business model, we have a different revenue model, which is, and the revenue model question is this. People confuse the revenue model question with the pricing question. The pricing question is, how much do we want our customers to pay? The revenue model question is, what do we want our customers to pay for? So you take a company like Csam, which is the largest, um, optical chain in the, um, Scandinavian countries. And when a bunch of young people took it over and started it, they said, we are gonna have people subscribe to us. And all the old timers in the optical wear industry, cuz you can imagine that's a pretty darn mature industry, said, that'll never work. People won't subscribe dye glasses. And they said, we're not asking them to subscribe dye glasses. What we're saying to them is, if you need an, uh, an eye exam, we will do as many eye exams as your doctor wants you to have in a year.

Ron(00:06:16) - It's usually just one. Um, and we will update all your glasses and contacts for any prescription changes and it's so much per month. And everybody told them it'll never work. Nobody's gonna subscribe to eye glasses. And they said, we're not asking them to subscribe to Eye glasses . We're asking them to subscribe to Perfect Eyesight that's not based on scope of work that's based upon a transformation or outcome. And that's what we need to get to. So the first question is your revenue model question. What are we asking our customers to pay for? Do we really want them to pay for a scope of work? Oh, you have, oh, you went from 10 employees to 20. Oh well we have to go to the Department of Paperwork and get a change order and we put 'em through all this friction and all these hurdles. We waste their time, we make it inconvenient.

Ron(00:07:08) - We, we cognitively load them with a pricing discussion every time a scope changes. We need to stop this. We're professionals for crying out loud. We are responsible for creating a result, not performing a series of tasks. And we need to align our business model with our rhetoric. And our rhetoric says the relationship is key and we want to be your trusted advisor or whatever words you use. And then look at what we monetize. We monetize services just like brick layers. Oh. With the more bricks we stack up brick by brick by brick, the more value we're creating. And that's not true at all. Customers aren't paying for services anymore than they're paying for the time that we put into something. They're paying for a transformation. They're paying for us to guide them from where they are to some desired future state. And that's the highest point on the value curve that you can be at, is when you guide a transformation. Because at that point, the customers, the product, the services are just a means to an end. I know I rambled there, so

Adam(00:08:06) - No, no, I, I love, love the ideology and, and I kind of have a, an analogy that I run through with all my customers to kind of explain our value proposition and kind of our brand promise, if you will. And it is about being a guide. And so whenever they subscribe to us, they're really subscribing to the team and our mm-hmm.  and our knowledge and us guiding them through that process. I think what becomes a little bit more difficult whenever it comes to some of those services is, is one, they're navigating a big ship, right? So it's not one of these things where I'm just gonna walk in and give you an aha moment and you're gonna be like, oh, I didn't realize I was mis I was not running my business correctly for the last 20 years. So we have to like, develop these, uh, agendas and, and all these kind of deliverables, if you will, along the way so that they can kind of see that value of mainten the business. Um, but I think that whenever you kind of back into some of the ca um, you know, ca 1.0 services that are very transactional in nature, like handling the accounting and, uh, you know, paying bills, doing accounts receivable, processing payroll, how does that work when it is very seemingly transactional in nature and you're trying to, again, not worry necessarily about the scope per se whenever it comes to very transactional items like that, that we just naturally deliver as, uh, in our profession that are outside of just the consulting side.

Ron(00:09:30) - Right. Well, well, I mean this, I I don't think that's a pricing question. I think it's a strategy question and a positioning question. Are we Morton's Steakhouse? Are we McDonald's or are we a vegan restaurant? You can't be all three . Your brand can only stand for one thing. You can't, we can't sell be selling Rolls Royces and Chevys out of the same dealership. That would just confuse the market. Um, so the first thing is what's your strategy? And my North star for this, um, is the concierge doctors and their baby cousins, the direct primary care doctors. Now, you might might have seen this, Amazon just purchased one Medical, which is the largest D P C practice across the United States for 3.4 billion. You can subscribe to a one medical general physician if you're a prime member for $144. It's 12 bucks a month now Amazon's play obviously is to sell you the drugs and everything else that's gonna come around that.

Ron(00:10:28) - So, you know, it's a little bit different. But whether you're a concierge doc, and we can talk more about this or D p C doc, the, the, the, the, the strategy is the patient, customer subscribes to the practice. Just like you said, Adam. They're not subscribing to one, you know, they're subscribing to a team of experts and whatever that patient needs that the physician can do. Now he's a general physician, so he is not gonna be able to do your heart surgery. He is not gonna be able to replace your knee. He's not gonna be able to give you oncology treatment. If you have cancer, he can get you to those specialists and he will even come to you with his a with the on the appointment. But you're covered for anything that he can do medically that he's competent of doing. So this is a different revenue model.

Ron(00:11:13) - What's the customer paying for? Not for services. They're paying for peace of mind, access, convenience, a frictionless relationship. It's services simplicity, which we love as customers. Cause I love to just hit one click and have it show up the same day from Amazon. And by the way, I'm comparing every single experience with every other business I encounter with Amazon. One click. We don't stack up very well as CPAs when we do that. And I promise you, your customers are doing that. Your digital interface, your mobile interface, your your portal, whatever it is that you use, we're all being compared to one click. And to me that's kind of scary. We need to up our game. These DPC docs are growing like weeds. The demand is way beyond the supply. There's about 1800 of 'em across the US and those are independent DPCs. And then of course there's chains like one medical that Amazon just bought.

Ron(00:12:07) - These guys are revolutionizing the way healthcare is delivered. That's my North star. We should be like the D P C doc. The D p C doctor is not just there to, to, you know, cure you when you're sick. He's there to keep you healthy. Mm-hmm. . So human beings want three things outta life. We wanna be healthier, wealthier, and wiser. Right. Uh, and fi CPAs in that order in, well, no , um, well, maybe, um, but, but CPAs can help us, you know, we can help our customers stay financially healthy and we can also make them wiser, I think too. And I, I think that'll contribute to their health, by the way. But the bottom line is that's what we should be p pricing for, not the scope. I don't care about the scope of work. If I'm well positioned, if I know I'm a Morton's or a McDonald's, the scope of work is on the rails.

Ron(00:12:55) - If my customers are growing, they have more transactions, they they hire more employees. Good. I hope we help them do that. So I'm, I don't want to charge them every time a scope changes cause that's not where the value is. The value is in guiding the transformations and bringing them to a desired future state. And we as CPAs do that every day. We just don't use the language. We help our clients grow their business. We help the business become more valuable. Mm-hmm. , we help them retire sooner. We plan their legacies, we plan their legacies. If we do a estate and, you know, tax planning now, what's that worth to somebody like Mark Zuckerberg or Warren Buffet or Bill and Melinda Gate? How much do they spend on planning their legacy? It's billions of dollars. It's not a commodity because now we're touching the customer's soul.

Ron(00:13:45) - We're no long. The, the, the services, the scope of work. That's just a means to an end. We have to get back to why we entered this profession. I've been asking this question all around the world of all professionals, doctors, lawyers, architects, you name it. Number one answer two thirds of the time or more is to help people. You can't help people. If you have a thousand customers, you can't make a deep impact on their life. You can't help people. If you are trying to be all things tall people, , there's no way to make anybody happy. Right? We're not tequila. Um, so I just think this business model aligns with why we enter the profession to help people. I didn't join this profession to build the most hours, to keep a time sheet, to do the most tax returns , you know, to, to work, uh, the hardest and busy season. I joined this profession to help people and we need to get back to our purpose. And I think the subscription model gives us a business model finally, that monetizes what we say is a deeper and, and most significant to us, which is that relationship. And so that's why I think it's a superior model to value pricing.

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Tom(00:15:31) - You know, when you, when I read the book, Ron, what you've been describing was the biggest surprise when I first started reading the book because I thought this is gonna be a bottle, a book about subscription models and how to do it and sort of why it's better and things like that. And throughout the whole time I'm like, oh, this is much more how do you run a business? How do you have a culture where people want to belong, customers feel valued, and you're doing something that matters in there. I'm curious in the, you've given some really good examples of what subscription model looks like. Do you see any place in the accounting profession where you're thinking people are close or actually doing what you're describing? Well,

Ron(00:16:05) - I always talk about Jodi because I do think you, you know, you guys are doing it. I mean, um, I I've, I've had discussions with Jodi about keeping time sheets. I think they're completely unnecessary, hence the title of the book Time's Up. But yes, you guys, I can't believe in the year 2023, we're still debating the necessity of time sheets. I got rid of time sheets as a CPA in 1989 when there was nobody on the circuit talking about it. When there were no books on it. There were no consultants out there talking about any of this stuff. And we just said, this is ridiculous. Because if we're not pricing based on time, why do we need to track it? You know, time sheets sure came from 1919, they're 103 year old technology or whatever that, you know, , it's, I mean, has the world changed? And I just think as this debate is just, I, in my mind it's over. And now with subscription, it's completely blown up because all the KPIs, which as you know, are well documented for subscription, you know, for SAS type businesses mm-hmm. , um, there's no, there's not one of, there's not one K that has anything to do with time for a SaaS business. Not one.

Tom(00:17:13) - Sure.

Adam(00:17:17) - Yeah. The only thing that we use our time tracking for, um, is that we, we try not to, so we don't use it as a punishment tool. We don't even really use it as a metric, you know, realization utilization. We don't do any of that stuff. I would say that, um, what we found to be true is that we would say this service that we provide, you know, that clients subscribe to consumes the majority of our time. And what it really does is it consumes maybe a disproportionate amount of energy, but whenever you actually look at the time involved in it, what we found in our time studies is that no, we actually don't spend a whole lot of time doing it. The team just hates to do it. Um, and it feels like it weighs more. And then I would say the same thing to be true, that whenever we do time studies, like the only time whenever I would ever look at like Tom's time sheet for instance, is if he ever came to me and said, Hey Adam, I can't handle any more clients.

Adam(00:18:10) - And I'm like, Hey buddy, you've only got three clients. What's what's going on? Like, you know, everybody else has 10, you have three, like, talk to me, you know, what's, what's going on? Cuz the math just isn't working. You know, your metrics aren't working, you know, recurring revenue and, and cost. And, uh, then I can dive in and what Tom will tell me is, customer A is just consumes my day. And then you're like mm-hmm.  according to the time sheets. Um, and if you are putting your time sheets in here, you're working about 35 hours a week on average. So you told me you're working 60, but you're really only working 35 and it's actually not that customer that is consuming your time, it's this customer, but you really enjoy working with this other customer. So working 10 hours a week on that customer doesn't bother you as much as two hours on this customer.

Adam(00:18:57) - Yeah. And I would say just from a virtual environment, what I find to be, um, probably the most problematic thing about working virtually people say the cutoff thing, you know, separation from work and home. I don't know if it's as, as black and white as that. What I've found to be true is a lot of people that work virtually present company included, have have opportunities to take longer breaks during the day, start their day later, end their day early, they pick up work. Um, and so somebody might start work at 6:00 AM put it down at eight, get the kids off to school or whatever, pick back up, work at 11, work till three, then they gotta pick up the kids and deal with all that stuff. And then they clock back in at nine o'clock. And, and I've had conversations with people that are just like, Adam, I'm working 60, 70 hours a week, I'm on.

Adam(00:19:46) - And I'm like, no, you're, you're, you're working like 38. Um, and it's because you've like separated your day. And so the only time whenever we use time sheets is really just as a tool. And I know it's the bane of everybody's existence and everybody hates to like enter the time. But really truly, the only time whenever we use time sheets is to help the individual. Like if they say, Hey, I'm feeling stressed, or I'm feeling like this is a problem, we just use it as kind of a, well let's just gut check it against what you're actually doing. And then oftentimes it leads to a discussion where, you know what, you're right. That's not really the problem. This is actually the problem. And then, then they come back and we, we work the solution. So that's the only thing that we really use time sheets on our side for is to help the individual not beat 'em over the head with like, what's your utilization rate? Or, you know, how are we, how many hours do we have on this one task inside of a a client or anything like that. We use it very holistic.

Ron(00:20:40) - Well, it, to me that's just micromanagement. I mean, how did these really smart people that you, you hire go through four or five years of college pass a c p a exam without ever doing a time sheet? How did we, how did we ever get by without doing a time? How do we manage owning home and having kids and paying for college without a time sheet? I mean, there's better tools out there and the best tool to replace it. And I told Jody, this is the after action review. It's a far superior tool because even, even in your stories there, Adam, in your examples, you had to have a conversation with Tom to figure out that  to figure out what was really going on. Because there's not enough granular information, time sheets, a measure of input. We should be holding people accountable for results.

Ron(00:21:25) - Now measuring a result is, is too hard. Which is by the way, by the way, why earmark, you know, and naspa, and it's not just earmark, but NASPA measures the time our butt sits in the seat in the CPE course because why mm-hmm.  because they can't measure what we learned right now. I think there's ways to measure what we learned. And the after action review is a great learning tool. In fact, I think is the best learning tool ever Deb devised. And that would be far superior than a time sheet. Um, there's thousands of firms out there that don't have time sheets, thousands. And, and it, to use a time sheet to manage your firm is the equivalent of timing your cookies with your smoke alarm. Because by the time you , by the time you see it on a time sheet, the damage has already been done.

Adam(00:22:07) - Uh, a hundred percent. Yeah. Yeah. Uh, yeah, there's there's no question about that. It's just all, I guess all I was getting to is like, sometimes perception and reality are kind of two different things and people just, I underst don't

Ron(00:22:18) - Really, I understand that, but the time sheets

Adam(00:22:19) - Don't really get it.

Ron(00:22:20) - But the time she's self-reported. So I think there're APAC lies anyway. I don't think our memory's really good unless you're using like spyware software, you know, like that Gallup in Canada who was sued by the way, for stealing time of the CPA firm, uh, forget the name of the CPA firm, but they sued her. She sued them and then they countersued her and they said, well, our spyware shows that you lied on your time sheet and you stole time from us . And she lost, she had to pay like three grand to the CPA firm. Wow.

Adam(00:22:48) - That's funny. Well, and and I, I do want to, um, just if we could dig in on the time sheet and the action plan because, um, post actually your talk at the D C P A, I have like a connection of, of, uh, people that I think are really just powerful people in this space. They're doing a really high level and, and they, a lot of 'em work at big CPA firms, some of 'em don't. And getting partners to get on board with what you just said. Obviously it's just a total mind blown kind of concept. But the action review, that's what I wanted to kind of pick on just, just for a moment. Yes, I get it. When you work in project-based work, like that seems doing postmortems is just kind of a normal course kind of a thing and best practice. How, how do you do that effectively in a subscription model where it's like Groundhog Day, it's rinse and repeat every week, every day, every month is kind of the same. Are you just suggesting like a monthly one? Is this just like a monthly one-on-one? Is it a weekly one-on-one? Because, cause the work's never really done per se in our model. Yeah. It's always evergreen.

Ron(00:23:52) - Right? No, I understand that. And and by the way, I hear that in transactional firms at Bill hourly. Oh, we never finish. We just go from one thing to another. Well, of course if you view everything that way, but when you look at how the military uses it, you know, and you look at, you look at uh, um, the Blue Angels or you look at the Thunder, the Air Force Thunderbirds, every time they fly, we, every time they go wheels up, when they come back down, they're doing a debrief, they call it in the Air Force. And they're talking about, you know, what were the objectives of the mission? Cuz there's always a reason for them to lift up their wheels. , they, they have that saying and uh, you know, what, what went right, what went wrong? And how could we do it better next time?

Ron(00:24:32) - Uh, NASA after a space, you know, uh, the, um, space shuttle launches, when they came back 11 days, they spent on after action reviews. We talked to one of the NASA commanders, 11 days, they watch videos cause they almost have video of the whole thing in real time. And they talk about everything that happened. Now, I think every firm has to find their own rhythm and cadence to this, but it it, it should be a team thing. So if a team is working on a particular customer or maybe a group of customers, maybe they meet once a week, maybe they meet bi biweekly. Maybe it's once a month. But that's where you get the granular information. And I'll give you a really hardcore example of this. I was talking about AAR with, uh, an I C U doctor and he said, wow. He said, you know about after action review, he says, yeah, I've been a fanatic about 'em since, you know, 2000 trying to get professional firms to adopt them.

Ron(00:25:21) - He said, we do one at the end of every shift in the ICU u I said, really? Hmm? He said, would you like to sit in on one? And I'm sitting in the corner with 12 chairs, uh, circled around the middle of this ICU ward. And, you know, and there's, there's curtains with people behind them. And then there's private rooms with all the really expensive equipment where people are really hurting. I mean, this is I C u, this is life and death. And these guys take a half hour at the end of every shift. And the two doctors are, you know, upfront and they have RNs and all the other acronyms they have in the medical world, and they're sitting around talking about that day's events. And they said, yeah, you know, I went in to change this person's IV and I moved him and Code Blue had to be called, and this is an RN talking.

Ron(00:26:03) - And then somebody says, yeah, before you move 'em, you have to do this and this and this. And I'm, I'm watching this in amazement because this is life and death. And I just heard an RN admit she made a mistake and she was in a safe enough environment where she knew it wouldn't get slammed on her performance appraisal. Which I think after action review is also replaced by the way, which I think is another set of kabuki theater that we need to do away with. Um, and I'm, I'm, I'm watching this in amazement, here are highly skilled professionals that are talking about what went right and what went wrong. It's not a blame game. Nobody's pointing fingers, nobody's worried about what the bosses are, are gonna think. They're all using it as a learning tool. How could we improve? What do we need to do to improve?

Ron(00:26:49) - And that is so embedded in the army and now in hospital culture as well, especially ERs trauma units and things. That's why we can save a life better. One of the reasons the murder rate has gone down is because when you are, when you do have a gunshot shot wound and you go into a trauma center, these doctors have a really high chance of saving you because they've learned from lessons learned. They, they've been doing after action reviews, just like the army and the militaries around the world. That's a phenomenal learning tool for a knowledge environment. And the big blowback I get, Adam, is, and we know what it is, they're not billable. You're asking me, Ron, to take 40 minutes, 50 minutes at the end of every shift or at, at the end of a project to do an after action review. And it's non-billable.

Ron(00:27:32) - Yes I am. Because that's your firm's invisible balance sheet. That's real knowledge transfer after action reviews actually improve future performance time sheets. Do not when you, when you rail on me for being over-budget on this or spending too much time on that, or what you're not teaching me or telling me how to improve or giving me incentive to improve myself. It's the wrong measurement. It's like plunging a ruler into the oven to determine its temperature. That's not how we measure the effectiveness of a knowledge worker by tracking the time they spent. It's not about the time. It's about the results and the learning they capture and how the organization can improve. And if the army can do it, CPAs can do it.

Adam(00:28:16) - Should that be documented? Should that be memorialized somewhere? Or do you just let it just kind of let it rip?

Ron(00:28:22) - No, it it, they can't don't we do AARs? The problem is they're ad hoc. They're done around the water cooler. They're done on Zoom meetings. If you're virtual, they're done at lunch. You know, we all talk about jobs that have gone south, right? The client didn't get the data. The data was corrupted. What, you know, million reasons why things happened that, you know, the first question in the after action review, there's four questions in after action review. The first one was, what were, what were the objectives? In other words, what was supposed to happen on this mission, on this project for this customer? And you know what, a lot of times people don't know . And that's what the Army found when they started doing these. If people don't know what the objectives of the mission are, it's probably going to fail. There's gotta be very clear communication and that's why bars started, which is before af before action reviews, even before you start working on something, you, you meet and talk about, you know, lessons learned from Pryor and all that. But, um, yeah, so it it, the, you you can document these things really easily. Throw an iPhone on the table and record it.

Adam(00:29:25) - Yeah. I think in an virtual environment, the, the one thing that I, I probably don't run into like the non-billable things. A lot of times it's just death by meetings. And a lot of people just especially I would say heads down, you know, c type personalities, like in the accounting space, they're just like, really another internal meeting. Like what's the purpose of the meeting? Like what's the structure? And if you get more than 2, 4, 6, 8 people into a room, especially virtually in a Zoom, everybody's gonna be checking their email. Nobody's gonna be really tuned in. So like in the engagement level is a challenge. The attendance is a challenge. And again, it's because we're not actually doing a project this week. We might have done a variety of different things and we held a meeting and we did that with the client. Like we were all in the same meeting.

Adam(00:30:11) - We talked about their pipeline this week, next week we talked about their financials the next week we talked about their forecast. Like we have all those kind of things. And I'm trying to, I, and I've, I've always told the team, the client, and we will always benefit the more we talk together about the client. Right. You know what I mean? So, so I think the, the, the review that you're talking about is important to just have a conversation about the client. I think the client always wins. We get better at communication. We get better about understanding what the client needs are. It's just, again, finding that carve out time that people on the team feel are valuable. You know, and really just tightening that up I think is, has been well, has been my challenge over the years here.

Ron(00:30:51) - Here's what I would say to that. If the after action review can replace the time sheet, which it can, and if it can replace the annual performance appraisal, which is another completely ridiculous, uh, you know, brain dance that we go through as organizations that also does not improve future performance to have an annual performance review. How much time would that free up if people didn't have to do time sheets and people didn't have annual performance? And it would probably even clobber a bunch of other meetings as well. I mean, this is why it's such a big part of the DNA n a of the military. I mean, I talked to a guy who served two tours in Iraq. He said, Ron, we changed the toilet paper in the latrine and we're a aring it sometimes in the middle of a mission, you can see guys huddled in a circle.

Ron(00:31:33) - So, you know, all military up having an after because the enemy did something that caught him by surprise. Right? We make plans, God laughs. Right? Mike Tyson, everybody's got a plan until you're punched in the face. And now, you know, we don't have the life and death issues of an ICU or a military. I understand that. But we are knowledge workers and knowledge workers can share tacit knowledge and improve future performance by collaborating and discussing with their colleagues what went right, what went wrong, why did it go wrong? What lessons have we learned? How could we do it better next time? And what's more important than that? We talk, we, how much time do we spend on tech stack apps, streamlining processes, efficiency, blah blah blah, blah, blah. And yet there's no time to sit back and reflect on the lessons we just learned. We, we frantically go from one project to another one, one engagement to another, one customer to another. And if you don't step back and reflect, you'll never have l learning that lasts. Yeah.

Tom(00:32:35) - Ha. Have you seen it work, Ron, to do it as part of other meetings? So Adam, one thing I think of is like, we do a kickoff process with new clients, right? Six to eight weeks. Let's get everything up so that we can stand up the full service. Most of those teams are meeting once per week as sort of project management. Where are we? And things like that. And as I'm hearing you talk, I'm thinking one things we don't really do is, okay, can we do a small and after action review during that meeting? How are we doing so far? Yeah. What's going well? How are we gonna improve this in the future? Would you think that's a good idea or would you say no? Doing it as part of another thing doesn't really give it,

Ron(00:33:08) - I I would experiment with it. I mean, I, I know firms that do before act, before action reviews the bars mm-hmm. , um, and, and by the way, this is somewhat part of the Toyota production system is too, cause they do it as well. And then they do the after action reviews after the project is completed. Or maybe a milestone or a phase of the project is completed. I'm not suggesting you do an after action review after, you know, doing a simple tax return or something like that. And you can focus them just on the 20% of your customers. Maybe that generate two thirds of your revenue or whatever. But, but the important thing is, you, you gotta col since we work in collaboration with one another, we've gotta, we're trying to get the tacit knowledge out of people's head and making it explicit somewhere.

Ron(00:33:51) - Whether it's in a spreadsheet of PowerPoint presentation, a video, a, you know, whatever. That's explicit knowledge. But the tacit knowledge in our head is knowledge workers. That's the stuff that's really valuable. That's the stuff that's very difficult and very, very expensive to transmit. This is why it costs so much to train a doctor or a fighter pilot because it's, they can read manuals all day. They can sit in presentations, they can watch videos, but it's the tat knowledge that they can only get from their flight instructors and from one another. And I, I'm fascinated by how knowledge workers learn. They don't learn by sitting in a CP course. Trust me, I've been teaching CP for 30 years and it's a joke. People are talk about people being checked out. They're putting solitaire. In fact, if anything, I think CP providers need to charge more for the back, the seats in the back of the room. We've always said that , it should be the reverse of the airplane. You should that, that those are the first class seats because most people wanna sit in the back anyway. Um, the other thing is, firms that have been doing after action reviews, once they become embedded into the culture where it's just part of what you do, it's, it's no longer thought of it, you just do it. Um, they turn 'em outward and they start doing them with their customers.

Ron(00:34:59) - That's where you get another set of really powerful lessons on how you can improve the customers love it. Plus you can teach your customers how to do AARs in their organization. And how valuable is that? They're transforming. I mean, they are life transforming and this profession doesn't use 'em and it frustrates the heck outta me.

Tom(00:35:19) - Sure.

Adam(00:35:19) - No, I think that's a great point. I think it's, it is all about repetition and, and just changing the norms and then once it becomes the norm, it's, it's no big deal. And, and we try to do that like with our client relationships. What we've tried to do to, um, impact scope creep as, as everybody's concerned about is we've kind of flipped the narrative where we don't have the client driving the relationship in terms of asking questions. We take a pretty proactive approach and we have stated meetings, agendas, titles of the meetings, so the, so the client knows why they're showing up and what we're gonna talk about that day. And so, and we've, we've worked really hard about not creating homework for ourselves either. Like make it a semi working meeting where we're collaborating and talking. I think the challenge for us is, and I think one thing that I've always struggled with with our firm is collaboration is one of our core values.

Adam(00:36:09) - Um, and I think there's varying definitions of what that means, but to me that means we're like sitting around talking about the client. And I think a lot of times that happens in front of the client in these meetings and then we disperse and we're onto our next meeting, our next client. And I don't feel that that sense of, of just collaboration behind the SA scene unless I need something. You know, it's not just like this innate, like let's have a chat. Like you were talking about the end of the day with the, um, and it's because maybe they work on 10 different teams, maybe they're working in five different operating rooms. Sure. So it's like, which room do I go to? Um, but I think we could do better at that. I think, um, you know, that just kind of drives home the point of just, you know, just getting outta sight of your comfort zone and and creating new norms. So

Ron(00:36:56) - Yeah. Jodi,

Adam(00:36:57) - Jody and I'll definitely have that conversation.

Ron(00:36:59) - It's definitely, I mean, we've created an after action review agenda, and I think I sent it to Jodi that is kind of based on the army's, you know, four questions. We kind of mm-hmm.  expanded it out. Me and my co co-host head class, uh, for knowledge workers for knowledge environment. So, you know, rate these projects on a scale of one to 10, you know, how do you think it went, whatever. Um, but it's very specific and you're not supposed to spend more than 50 minutes or an hour. And then after action review, the army's even got very rigid guidelines on each question, how much time you should devote to each question. But the point is just talking about it, this is how knowledge workers educate themselves. We talk, right. We socialize. That's internalizing that tacit knowledge. And I, I mean that builds the firm's invisible balance sheet.

Ron(00:37:42) - That's a process just as important as any tech stack you have or app that you use. Um, so I I I mean I think they're critical if you really want to become a, uh, a champion of after action reviews. Take a look at the book called The Survivor's, uh, survivor's Obligation by, um, okay. Um, ah, I forget his name. Um, , uh, he's an, he's a former Air Force Thunderbird who ejected at, from a live air show from his F 1640 feet off the ground or 25 feet off the ground. It compressed his spine by two and a half inches. Um, uh, Colonel Chris Strickland. Chris Strickland is his name. Okay. And, uh, it, it's a phenomenal book because he, he takes you through that flight. But he said, the reason I'm alive is because of our after action reviews. I knew exactly what to do in the moment.

Ron(00:38:32) - Interesting. And he only had a couple seconds to react, but he's like, he said, because we had AAR this situation over and over, we knew what to do. Mm-hmm. , we don't spend enough time doing that. We, we, we, we hire somebody, we throw 'em out in the field. Um, and we don't give 'em much training. I'm not saying you guys, I'm just saying in general as a profession. Mm-hmm. . And we, we expect them to, you know, learn all these lessons through osmosis. But the problem is, it's really inefficient. If I could have started my career in a, in the big eight that I did and be when they assigned me to go do something, maybe part of an audit or something, if I had some after action reviews, I could have read on prior teams that had done this project, I would've been not only more efficient, but it would've more importantly been more effective. So it's a way also to bring up new team members up to speed much quicker than, you know, just throwing them into the pool on the deep end.

Adam(00:39:25) - Yeah. I mean I think the book covers a lot of, um, you know, not only like the purpose led, you know, and just kind of mindset there, but I think you also have some really good tidbits in there about just change management overall. And some things that I kind of wrote down cuz we're, we're in as always, we're always just kind of evolving and changing our, the way we're doing things. Like, one thing you wrote down I wrote down was like, we do this so that we can, like in all caps, like in terms of doing some of those things. So I think even just introducing topics like, um, the after action review and those kind of things, um, and explaining to people in a certain way, um, is, is pretty helpful as well. And then, um, you know, even in another area, I, I think we got really good probably about, I don't know, it was probably about 10 years ago.

Adam(00:40:13) - All of our clients, they, they're um, and I'm, and I'm saying clients right now, um, but they said, uh, they changed from staff or employee to team members mm-hmm.  mm-hmm. . And I think we've changed our internal vernacular to where everybody just refers to employees as team members always. Mm-hmm. . Um, and I think one thing that I like double and triple underlined was like to get customers and clients out of my vocabulary and replace it with members . Like even in the initial call with clients members  that, you know, like talk about the membership because we do talk about, it's a subscription service and it's based on, um, you know, it's based on subscribing to one of these different tiers. Um, now we do deviate slightly from your recommendation, cuz I know you said you absolutely do not like a la carte items.

Adam(00:41:06) - Um, and we have some a la carte items, but it's almost like, uh, the, so the base service is based on like what we specifically do consulting. You have like a small medium and a large. So you subscribe to one of those services and then we don't necessarily force anybody to use us for accounting or to use us for tax. Sure. And so we refer to those as being a la carte because they can be bolted onto the small, medium, or large. Right. It's not like the small always includes accounting and tax. So that's the why, the reason why we kind of refer to that as a la carte. But we do as a base have those three levels of subscriptions and then from there it's like, oh yeah, but I do need you to do my bank recs for me, or I do need you to do my tax returns. But we don't wanna just presume that right out of the gate cuz that's what's not most valuable to us or to our clients. It's that core service. Um, so again, thank you for like, now I'm gonna try really hard not to use the word. It's gonna take me a while. I promise not to use clients or customers. I'm gonna start referring, I'm gonna see how long it takes for me to infect the rest of the team to where they're  where they are start saying members instead of, instead of customers and clients.

Ron(00:42:19) - You know, American Express has the greatest tagline on that. That membership has its privileges.

Adam(00:42:24) - . That's

Ron(00:42:24) - True. And, and, and, and you know, and that's the thing that, and another thing that separates a subscription from value pricing or other types of business models is the customers know they subscribe. When you subscribe to something, you know, you're a subscriber, I know I'm a prime member even though there's not a membership criteria and they're not gonna turn anybody away, we should be more choosy than that. But I know I subscribe to, you know, my country club or Sirius or Porsche Drive. Right. And I can, and that means also that I can cancel anytime, which is another big thing in the subscription. You gotta make it really simple to cancel, just hit, cancel and you're done. I mean, Netflix canceled 400,000 bucks subscribers back a few years ago because they weren't, they were paying for it, but they weren't accessing it. And Netflix said, we don't want you to pay for something you're not getting any value from, so we're gonna cancel you.

Ron(00:43:10) - Hmm. Now a cost accountant would say, are you kidding? Those are the most valuable customers they're paying and they're not accessing, they're not costing us anything. Well, that's the wrong attitude in the subscription world. In the subscription world, you want your customers to spend time. If we are gonna track time you guys in this profession, we should track two things. One, the time that we spend with our customers, the time that they give to us. And that's the difference between having customers and having fans versus having an audience. If I have customers and fans, I have to pay to get their attention around Facebook ads, TV ads, super Bowl commercials. But if I have an audience, they willingly give us their time. That's the most privileged when you have an audience. And the other thing that we should track is how much time we save them.

Adam(00:43:58) - Yeah. No, we, we do, we do actually, whenever we would look at job costing, it wasn't just like looking at like which clients were costing us the most. We always flipped it and said, which clients are we underserving? Cuz if I saw 95% profitability on a client, I felt like why aren't they engaged? Like to me, whenever we were wildly too profitable, i e not enough cost into a client, that meant we weren't investing enough time into the relationship. And likewise, the client obviously wasn't investing time with us. And those are just, you know, not good clients for us. Um, so

Ron(00:44:34) - It really is more about client selection. Right? Right. I mean, that's why I think the KPIs that some of the DPC docs and concierge docs use are KPIs are predictive indicators, not the performance indicators. The performance indicators are indicators you can pull from a financial statement. And by definition those are about the past. That is by definition about the past. It means it tells you nothing about the future. Un unless your theory is that the past is gonna equal the future plus 10% or something, which is a crappy theory these days. , uh, just ask Google about chat g p t and see what Sure, you know, surprises the future can bring black swans and whatnot. But, um, the d p C docs track things like, um, you know, reduction of comorbidities saved, ER visits, saved hospital admissions, saved tests that they don't, or diagnostic procedures that they don't have to do because they're not doing defensive medicine because their business model doesn't say we're only paid when we do something to you. And that's what a fee for service model is, that doctors are only paid today when they do something to us, not for us. These D P C docs have a completely different attitude. They wanna spend two hours with you when you come in to see them. Their average appointment is over an hour and sometimes too because they're trying to learn everything about you so they can keep you healthy.

Adam(00:45:53) - So how, so gimme an example in accounting on how to convey that value to the client. Because again, I, I think a lot of times, um, what we've found is we have a tendency to do a lot of things behind the scenes for clients in a concierge's way that they just don't feel or understand. And, you know, and, and you know, the client will be like, and, and we will do very meaningful things like we, we educate our clients. That's what it's all about, is just showing them the future, showing them what those outcomes look like based on predictive measures. You know, so we talk about, you know, true lead indicators and things of that nature and we're constantly coaching our clients up with that. Um, and, and it's like gravity, I can't really explain it. It's just one of those things like the client just naturally makes better decisions, you know, armed with that kind of information, that education.

Adam(00:46:45) - But again, it's not a thing that I handed them, it was a meeting, it was a knowledge transfer, it was those kind of things. So I hear what you're saying, but like from a, from a CPA firm standpoint, from an accounting firm standpoint, for those people out there, how do they convey that value? Either in the upfront messaging to a, to a prospect, a prospect member, and or after the fact and somebody's like, Hey, I'm, you know, this feels good, but what have you done for me lately? Because, you know, you haven't had that aha moment. Cuz again, it's about small moves, not just like big huge moves. So do you have any examples of, of how to kind of like, quantify that for, for all of us accountants out there?

Ron(00:47:23) - Yeah, I think, you know, demonstrating value early in the relationship is, you know, you, you understand the subscription world. That first 90 or a hundred days is really important. That's why I like a project right out of the gate. Some type of transformation right outta the gate. Um, so like in the IT space, the, at my colleague ed classwork with, you know, these guys are doing c R M installations or they're doing, uh, accounting, uh, transitions, you know, from I know QuickBooks intact or something like that. And they're doing that just by putting folks on a subscription and then they're doing this big project and they're not charging a one-off for it. They're not increasing the, the, the length of the term of the subscription. In other words, they're trusting their value. The quicker we can get inside that organization and demonstrate that we're competent and that we're good and that we, we do what we say we're gonna do, then we're gonna keep 'em for life.

Ron(00:48:14) - And if we don't, we don't. That that's the risk of being in business. Right. Profits come from risk. And I love that because it just, it it, it's, it's like if you've watched the private equity space, they're taking over these mom and pop car washes and they're turning them into subscriptions. You can probably subscribe to a car wash near you somewhere for like 19 bucks a month or whatever. And it's unlimited. Yep. It's unlimited. Yep. And the mom and pops are, well, what if they come in, you know, every day? And some of them did for the first month or first two weeks, they come in every day and get their car. And the PE people were like, great. Get them addicted to it. Get them to ha ha force it to be a habit. They'll see the value and then they'll back off. And sure enough, that's what happens.

Ron(00:48:59) - So I think demonstrating that value is part of our branding, it's part of our messaging, it's part of our communication and language. It's calling them members, not customers. Uh, membership has privileges. And it's also this, and this is really a, an important lesson from the D P C and the concierge doctors. Average general physician in the United States has a panel of patients of 2,400. That's why we could spend five minutes with our doctor and half that time he's in front of his laptop typing into your electronic health record, which the DPC docs don't use, or if they do, they're, they're done later.

Ron(00:49:34) - DPC docs have 600 patients maximum, sometimes less. So they've cut their capacity way down, which means they always have free time. They'll come to your home, they'll come to your office. Concierge doctors, some of them only handle 50 families. That's it. So when you can tell your customer, Hey, you're, you're privileged as a member, which means you always have access to us. And that means more meetings, more communication, more interactions, uh, and that's where value is created. The value, not in selling our hands, doing services, whether it's behind the scenes or we do it in front of 'em, the value is in that communication that we have, that education help making 'em wiser. Um, and the reason we don't do that at CPA firms is cuz we have too many customers. Relationships don't scale. And this is what something I admire about Jodi and you guys at, at Summit. Don't you limit everybody's number of customers to a certain amount? It's kind of like a, a Dunbar number, isn't it? It's around, what is the number? Is there a number

Adam(00:50:37) - 15 to 20? It depend on the role, but yeah. 15 to 20 relationships. Yeah.

Ron(00:50:41) - Okay. See that, that is an incredible value differentiator because I know you always have capacity. I'll, I'll give you a very tangible example of this. I have an eye surgeon who I called last October 1st because my glasses were scratched. I needed a new prescription, mine had expired. And I, and I love this guy, great bedside manner explains, I I love him. I call him his office and they say, the doctor can't see you until January 29th. This is October 1st. So what? So I pitched the bitch, she got me in on December 29th. Okay. A whole month, three months. Right?

Ron(00:51:19) - And, and I'm like, okay, now I have to go find another doctor. I have to go over here for that. She, he's now become dispensable in my life. Not indispensable. He's now completely expendable. And when I finally got into him, I read him the riot act. I said, doc, why don't you have a subscription plan where I can cut right to the front of the line, just like the car washes do when you're a member of the car, where you go, you go run a different line. You're right in front, just like Disney and Universal Studios have those passes. And he looked at me and said, you mean like concierge doctors? And I said, no, it doesn't have to be that elaborate. I said, just gimme an option because if I can't get to you when I need you, what's the point? Now again, I have very high service standards and I'm comparing him to Amazon. One click. Right. . Which is unfair. But, but

Adam(00:52:05) - Listen, I do the same.

Ron(00:52:06) - Yeah. If he's got 5,000 patients, then he's working too damn hard. And, and to go right back to the very first thing we were talking about, that's not why he became a doctor.

Tom(00:52:18) - Yeah.

Ron(00:52:18) - He became a doctor to help people not to see 60 patients. He probably sees over a hundred patients a day cuz he is an eye doctor. And so they, the time they spend with you is even less than a gp. That's not why he became a doctor. And the d direct primary care doctors and the concierge doctors, they figured that out. They're living their purpose of why they became doctors in the first place. We need to do the same thing. And that means forer patients deeper impacts.

Tom(00:52:47) - Yeah. I feel like we could talk about this for, for 10 hours straight and we don't have the time. That feels like a really good place that you've kind of brought us back to that, that if you're going through this and look reading through times up and I was doing the same thing. It, it really is coming back. Why did you get into this? And then what problem can you solve for the customer and how do you build something around

Ron(00:53:05) - That? And, and even more than problem, the problem solving, we didn't talk much about transformations. Maybe we can do it part two or whatever, but Sure. The, the reason I don't like to talk about or focus on problem solving, I'm not saying problem solving is important. And I'm not saying we shouldn't do it. We do it, we're great at it. We can get the IRS off somebody's back. We can catch 'em up on compliance work or whatever it is, fix their books. You know, whatever. We're great at problem solving. But if all we're doing for our customers is solving problems, we're just reverting 'em back to the status quo. We're not advancing them. Mm-hmm.  transformations advanced people, like, like Paul Dunn says in the first part of his book, nature doesn't look for problems. It looks for potential. We should be looking for our customers desired future states and guiding them there.

Ron(00:53:52) - Because again, once you do that, the customer's, the product and there's, there's no better way to demonstrate value than to guide a transformation. And that's another thing you can do early and upfront is guided transformation. And that doesn't have to be elaborate. People think we talk about transformation, meaning getting married or joining the military or getting their C P A or whatever. Sure. Transformations can be that because they change the person forever. But they can also be small little incremental things as well, whether it's in their personal life or in their business. And we're capable of doing these transformations serially over and over and over and over and over again. Porsche Drive can't do that. Sure they can, they can help me through my midlife crisis and they can make my, my neighbors envious, but they're not really transforming me. Mm-hmm. , we are privileged as CPAs because we can transform our customers just like doctors can transform us, keep us healthy, live longer, all of that. And we're running way below our potential. I feel a lot of times like we're surgeons piercing ears. We're not living up to why we enter this profession, which is that those deep lasting, impactful transformations and we can do 'em from womb to tomb, from college planning when the kid's born to estate planning when they're gone. Yep. We have that capacity and that's a privilege for us and that's why we became CPAs.

Adam(00:55:15) - We should definitely do a part two on transformation. Cuz uh, I agree. Yeah, cuz that, that gets me thinking on a whole lot of levels. Cuz like I said, I think that challenge is just making sure that people understand that value of those incremental changes. You know, otherwise I get it. You're, you know, you don't want to constantly be treating symptoms. You wanna get to the root and, but a lot of these transformations are like looking in the mirror. I can look in the mirror every day. I don't see a difference. But if I take a picture from 10 years ago, I'm like, wow, I got hope. You know, those kind of things.  like, but so it's like trying to help a client realize that you are making these small incremental things and there's a lot of value to that. That's always kind of, that's our brand promise and we are very clear about that at the beginning. Uh, but sometimes that can get kind of lost in the, in the day-to-day grind. And so y

Ron(00:55:59) - You, you know, the reason, and I probably talked about DPC docs too much, but the reason I talk about the medical profession so much is cause there's so many parallels between what they do and what we do. And one of the things that DPC docs learned and struggled with is this idea of creating value early on and demonstrating their value. They had to reeducate every single patient. No, no, no, no. When you have an issue, you call me, you text me, you FaceTime me, you email me. They were doing this long before Covid by the way. And because they said that's what you're paying us for. You're paying us for that access when you need us. And we always have capacity to handle you. And that required a huge education reeducation because most patients think I only go to the doctor when I'm sick. No, no, we wanna see you when you're healthy, right? Because we wanna put you on a, a health plan. You know, whether that's weight, comorbidities, whatever it is. And it just required them to let the patient know that we're here for you and you know, and schedule more regular appointments with us even when you're feeling fine, we still wanna see you. And yeah, if they can do it, we can do it.

Tom(00:57:07) - That's an excellent, excellent point. Well we do wanna do a part two, so I hope people are really enjoying what we've talked about. Cause I think we've got several other things that we could, we could go on. But we'll go ahead and stop before we are today. Ron, thank you very much. This is really valuable. Um, really different way of thinking about lots of different things.

Ron(00:57:22) - Thank you Tom. Thank you Adam. Appreciate it. Yeah,

Speaker 0 (00:57:24) - Thanks. You enjoy this podcast. Visit our website@summitcpa.net to get more tips and strategies for achieving modern CPA firm success. We are here to be a resource in this ever changing industry.

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