Nov 18, 2019
Why you have to check out today’s podcast:
- Learn about why the accounting world, as well as the cars industry, are leaning towards subscription pricing these days
- Discover why timesheets focus firm leaders on the wrong things especially in pricing and value setting
- No Timesheets? Is it Possible?
Ronald J. Baker is the founder of VeraSage Institute, a reformed CPA and cost accountant who has changed his mind on the value of timesheets and cost accounting. His quest is to bury the billable hour and timesheets.
He is also a radio talk-show Host, The Soul of Enterprise: Business in the Knowledge Economy heard on www.voiceamerica.com.
In this episode, Ron articulated so well his arguments over not using timesheets in setting up pricing. He has refuted all defenses for use of timesheets. At the same time listen to him as he gives profound examples and explanations as to why certain pricing value and cost models are appropriate for particular industries.
“If we took the time that we spend [or waste] doing timesheets and did after-action reviews instead. I think we'd be much further ahead.”
- Ronald J. Baker
Get Accelerate Your Subscription Business: Your Blueprint to Packaging & Pricing for Growth Course
at https://www.championsofvalue.com
Topics Covered:
02:18 - Talking about four defenses for timesheets in relation to Pricing
03:34 - Taking into consideration the Cost of Goods Sold in setting the price
06:58 - Difference between a metric and measurement type of cost allocations
09:16 - Of Opportunity Cost and Sunk Cost
10:25 - Is time really considered in setting up pricing
14:23 - Project management as a way of making better decisions in the future
17:25 - The best advantage of niching your expertise on
20:01 - The start of subscription pricing in the accounting world
22:13 - Insurance classified as subscription pricing
25:11 - What's the best thing about hiring an accounting firm rather than accounting staff for your business
28:34 - His thoughts on cars leaning towards a subscription model
Key Takeaways:
“Prices to me are like agents. Why do sports stars and actors and authors have agents not because they like to pay these people 15% of their gross revenue, but because these people can get them higher prices and your prices are your agents. So even if you're a solo entrepreneur, have somebody else help you with pricing because it will put a spine in you and you won't give yourself away because I think all of us are terrible at pricing ourselves.” - Ron Baker
“Keep in mind that I don't need to see timesheets to know your firm's costs. I need to know, I need to see your GL, your income statement and I need to know what your labor and all of that is. I'd much rather track revenue per person or labor cost per person, profit per person in a professional firm because that's a true measurement.” - Ron Baker
“Even if they're just starting out as a sole solo. Don't have any employees. I still think they can put a price on things consistent with their opportunity cost and what they want, willingness to accept and function fine, and this is an integral part of this, as long as they step back after the job is completed and do an after-action review and learn from it.” - Ron Baker
“If you're niched, if you specialize, it's much easier to know what something's going to take once you build up some experience.” - Ron Baker
“A subscription model is a way to lock customers in for life. So in value pricing to Oh you're pricing, not the customer. And this is the subtle difference, but bear with me, you're pricing the relationship and your pricing the portfolio because you're looking at it as a portfolio rather than a project or just a customer. You're actually looking at the entire portfolio.” - Ron Baker
“We're too busy. I think we confuse being busy with being effective and being profitable. And I'll see a correlation there.” - Ron Baker
Links and Resources Mentioned:
Connect With Ron Baker:
- Verasage Institute
- Email: ron@verasage.com
Connect with Mark Stiving:
- Email: mark@impactpricing.com
- https://www.championsofvalue.com